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THE CURRENT AND FUTURE ROLE OF SCIENCE 

IN THE ASIA-PACIFIC PARTNERSHIP 

HEARING 

BEFORE THE

SUBCOMMITTEE ON GLOBAL CLIMATE CHANGE 

AND IMPACTS 

OF THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

APRIL 5, 2006 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

TED STEVENS, Alaska, Chairman 

JOHN MCCAIN, Arizona 

CONRAD BURNS, Montana 

TRENT LOTT, Mississippi 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

GORDON H. SMITH, Oregon 

JOHN ENSIGN, Nevada 

GEORGE ALLEN, Virginia 

JOHN E. SUNUNU, New Hampshire 

JIM DEMINT, South Carolina 

DAVID VITTER, Louisiana 

DANIEL K. INOUYE, Hawaii, Co-Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

BYRON L. DORGAN, North Dakota 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK R. LAUTENBERG, New Jersey 

E. BENJAMIN NELSON, Nebraska 

MARK PRYOR, Arkansas 

LISA J. SUTHERLAND, Republican Staff Director 

CHRISTINE DRAGER KURTH, Republican Deputy Staff Director 

KENNETH R. NAHIGIAN, Republican Chief Counsel 

MARGARET L. CUMMISKY, Democratic Staff Director and Chief Counsel 

SAMUEL E. WHITEHORN, Democratic Deputy Staff Director and General Counsel 

LILA HARPER HELMS, Democratic Policy Director 

SUBCOMMITTEE ON GLOBAL CLIMATE CHANGE AND IMPACTS 

DAVID VITTER, Louisiana, Chairman 

TED STEVENS, Alaska 

JOHN MCCAIN, Arizona 

OLYMPIA J. SNOWE, Maine 

FRANK R. LAUTENBERG, New Jersey, 

Ranking 

JOHN F. KERRY, Massachusetts 

(III) 

C O N T E N T S 

Page 

Hearing held on April 5, 2006 ................................................................................ 1 

Statement of Senator Lautenberg .......................................................................... 5 

Report, dated February 22, 2004, from Guardian Unlimited—The Observer, entitled, ‘‘Climate Change—Key Findings of the Pentagon Report’’ ............................................................................................................... 51 

Statement of Senator McCain ................................................................................. 2 

Prepared statement .......................................................................................... 2 

Statement of Senator Stevens ................................................................................ 4 

Statement of Senator Vitter .................................................................................... 1 

WITNESSES

Connaughton, Hon. James L., Chairman, White House Council on Environmental Quality ..................................................................................................... 6 

Prepared statement .......................................................................................... 9 

Doniger, David D., Policy Director, Climate Center, Natural Resources Defense Council ........................................................................................................ 41 

Prepared statement .......................................................................................... 43 

Montgomery, W. David, Ph.D., Vice President, CRA International .................... 33 

Prepared statement .......................................................................................... 35 

Thorning, Dr. Margo, Managing Director, International Council for Capital 

Formation ............................................................................................................. 27 

Prepared statement .......................................................................................... 28 

APPENDIX

Inouye, Hon. Daniel K., U.S. Senator from Hawaii, prepared statement ........... 55 

Written questions submitted to Hon. James L. Connaughton by: 

Hon. Daniel K. Inouye ...................................................................................... 55 

Hon. Frank R. Lautenberg ............................................................................... 55 

(1) 

THE CURRENT AND FUTURE ROLE OF 

SCIENCE IN THE ASIA-PACIFIC PARTNERSHIP 

WEDNESDAY, APRIL 5, 2006 

U.S. SENATE, SUBCOMMITTEE ON GLOBAL CLIMATE CHANGE AND IMPACTS, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:34 p.m. in room 

SD–562, Dirksen Senate Office Building, Hon. David Vitter, 

Chairman of the Subcommittee, presiding. 

OPENING STATEMENT OF HON. DAVID VITTER, 

U.S. SENATOR FROM LOUISIANA 

Senator VITTER. The hearing will come to order. 

I would like to thank Senators Stevens and McCain and Chairman Connaughton for being here today for this Subcommittee’s 

hearing. 

The topic of our hearing is the current and future role of science 

in the Asia-Pacific Partnership. I called for this hearing to learn 

more about the partnership and how the initiative is integrated 

with an estimated $5 billion in other climate-related initiatives the 

Federal Government undertakes annually. 

The Administration announced the partnership last summer, 

and, together with the other nations, met in Australia in January 

of this year to begin the implementation of this multilateral initiative. The President requested $52 million in his FY07 budget request for this Asia-Pacific Partnership. This request includes funds 

for the Departments of Commerce, State, Energy, and the EPA. 

Each of these agencies is also involved with the Climate Change 

Science Program and the Climate Change Technology Program, 

where, again, we spend significant amounts annually. 

I want to thank the Administration for taking on this initiative 

and working strongly on the goals of the Partnership. Within the 

next few years, greenhouse gas emissions from developing nations 

will surpass those of all industrialized countries combined. So, this 

sort of initiative, global in nature, is going to be absolutely necessary to properly address any of these issues. 

It’s my understanding, for instance, that China plans to meet its 

skyrocketing energy demands with nearly 800 coal-fired power 

plants without the benefit of clean coal or gasification technologies. 

Of course, this undermines global efforts to reduce greenhouse gas 

emissions, and certainly confirms the wisdom of this sort of partnership, which is global in nature. In addition to the mandatory 

nature of the Kyoto protocol, the disparity in the treatment of inVerDate Nov 24 2008 13:18 Jan 14, 2011 Jkt 63518 PO 00000 Frm 000005 Fmt 06633 Sfmt 06633 S:\GPO\DOCS\63518.TXT SCOM1 PsN: JACKIE
2 

dustrialized versus developing nations under Kyoto, in my view, is 

a fundamental flaw. 

My primary concern here today is to ensure that our national climate strategy is a coordinated, productive one. I want to ensure 

that the taxpayers are getting every penny out of the Federal investment being made in climate change. And I look forward to 

hearing from our witnesses today to learn more on this topic and 

other recommendations to improve our national strategy from the 

panels today. 

With that, I’d invite the Chairman of the full Committee to make 

any opening statements. 

OK. Senator McCain, you were apparently here first. Why don’t 

you make any opening statements—— 

STATEMENT OF HON. JOHN MCCAIN, 

U.S. SENATOR FROM ARIZONA 

Senator MCCAIN. I thank you very much, Mr. Chairman. I applaud your efforts to review the role of science in the administration’s Asia-Pacific Partnership. 

We all recognize that the solution to the climate change problems 

will involve the use of many new technologies. The flow of scientific 

reports concerning the impacts of climate change has been continuous and voluminous. It highlights a number of critical concerns 

for people, not only in the Arctic region, but for people around the 

globe. 

As we look to the future, the need for effective adaptation strategies and technologies will become greater. It’s not enough that we 

do scientific study after study; we’ve got to prepare the country and 

the world for the onset of more severe and damaging impacts of climate change. Thus far, much of the attention have been on mitigation. I think we look—got to look at adaptation, especially if we 

continue to fail in our effort to mitigate the effects of global warming. 

I recently went to New Orleans to visit, at the invitation of the 

distinguished Chairman, and it’s clear that levees alone won’t do 

the job. The barrier islands have been dramatically decreased, and 

that has a great deal to do with the effects of climate change. 

TIME magazine recently issued a special report on climate 

change. The report highlights the damage that rising global temperatures are inflicting on our planet. The damage ranges from increased droughts, like the one we’re experiencing in Arizona, to 

melting polar caps, melting glaciers, rising sea levels, increased forest fires, and species migration. I recommend that my colleagues 

take the opportunity to review and consider the implications of the 

report. 

Mr. Chairman, I’d like my complete statement to be part of the 

record. 

[The prepared statement of Senator McCain follows:] 

PREPARED STATEMENT OF HON. JOHN MCCAIN, U.S. SENATOR FROM ARIZONA

Thank you Mr. Chairman for calling today’s hearing. I applaud your efforts to review the role of science in the Administration’s Asia-Pacific Partnership. I know 

that the Administration has placed great emphasis on the future on this program. 

3 

I think we all recognize that the solution to the climate change problem will involve the use of many new technologies. Though this partnership is part of the solution, it alone is not enough. 

Mr. Chairman, the flow of scientific reports concerning the impacts of climate 

change has been continuous and voluminous. It highlights a number of critical concerns for people not only in the Arctic region, but for people around the globe. 

As we look to the future, the need for effective adaptation strategies and technologies will become greater. It’s not enough that we do scientific study after study. 

We must also prepare the country and the world for the onset of more severe and 

damaging impacts of climate change. Thus far, much of the attention has been on 

mitigation. Now, we must also start to look at adaptation—especially if we continue 

to fail in our effort to mitigate the effects of global warming. 

TIME magazine recently issued a special report on climate change. The report 

highlights the damage that rising global temperatures are inflicting on our planet. 

The damage ranges from increased droughts—much like the one we are experiencing in Arizona, to melting polar caps, melting glaciers, rising sea levels, increased forest fires, and species migration. I recommend that my colleagues take the 

opportunity to review and consider the implications of the report. 

The cover of the issue shows a polar bear as it tries to negotiate what was once 

solid ice. Because of the disappearing ice floats, many polar bears are drowning. The 

U.S. Fish and Wildlife Service announced on February 8, that it has opened the formal process for listing polar bears as ‘‘threatened’’ under the Endangered Species 

Act because of this phenomenon. 

The TIME article reports that 85 percent of respondents to a recent TIME/ABC 

News/Stanford University poll agree that global warming probably is happening, 

and 87 percent believe the government should either encourage or require lowering 

of power plants emissions. In addition, 85 percent think something should be done 

to get cars to use less gasoline. 

This is a huge public outcry for action from our government. Yet, the Administration continues to support a voluntary approach. This simply will not work, nor will 

it deliver the type of response needed to address this pending environmental catastrophe. I know the climate change discussions continue in the Senate. However, discussion alone will not get it done. We must have meaningful and effective action. 

As these discussions continue, let me also remind my friends that climate change 

is an environmental problem with economic constraints, and not an economic problem with environmental constraints. The climate system will respond to reduced 

greenhouse gas emissions, but not to emission intensity ratios. 

Again, Mr. Chairman, I thank you for this hearing today and as you can see there 

are many issues to be discussed. I welcome our witnesses here today and look forward to their testimony. 

Senator MCCAIN. And just let me conclude by saying I continue 

to be deeply disappointed at the total lack of concrete actions taken 

by the Administration. Mr. Connaughton, I admire your courage for 

coming here. I talk about studies. We’ll talk about goals and efforts. You’ve done nothing, and it’s disgraceful what you haven’t 

done. And it’s disgraceful that we are going to lay a very, very serious problem on our children because of our failure to address this 

issue with any seriousness whatsoever. 

We’ll have witnesses, funded by ExxonMobil and others, who will 

tell you that climate change isn’t real, that we don’t have to worry 

about it. The fact is that we have done a terrible, terrible thing to 

future generations of Americans because of our failure to act in 

light of overwhelming evidence that argues that we act immediately and drastically to try to reverse this terrible affliction that 

our planet is experiencing, which, in the view of some, may be approaching the point of being irreversible. 

One of my deepest regrets is the failure of the Administration to 

do anything concrete to address this issue, besides platitudes and 

studies. 

I thank you, Mr. Chairman. 

4 

Senator VITTER. Chairman of the full Committee, would you like 

to make an opening statement? 

STATEMENT OF HON. TED STEVENS, 

U.S. SENATOR FROM ALASKA 

The CHAIRMAN. Mr. Chairman, I thank you. And thank Senator 

McCain for his comments. 

I feel there already is an Asia-Pacific Partnership in the International Arctic Research Center. That’s being funded now by a series of nations. And, certainly, it’s headquartered in my State, for 

an obvious reason. Some people have said that Alaska is sort of the 

canary in the mine, as far as the basic concept of climate change. 

And we are experiencing enormous change threatening our native 

villages. I’d like to point out that we’re working very hard to help 

people in—that were in the path of Rita and Katrina, but we had 

a near typhoon off of our shores up there. We had nine villages almost destroyed, 19 were very seriously damaged. We’re still waiting for the money to be allocated. We’re still waiting for their help, 

and it’s almost—you know, over a year ago that took place. 

I do think that not only should we be helping them, you know, 

to relocate their villages—and most of them live on barrier islands, 

and they’re—no longer have access to the mainland, in some instances. Their airports are flooding. In the event of another disaster of the same type, we wouldn’t be able to evacuate them if 

their airports flood, because there are no roads out of those places 

anymore. 

There are a lot of things we should be doing. But I think we 

should take the changes very seriously, and look at the causes and 

effects in our State. I personally showed the President a chart yesterday of the difference between Arctic Ocean in the 1970s and Arctic Ocean in the 1990s, in terms of heat distribution, and it shows 

very clearly that there has been an enormous amount of heat that 

has entered the Arctic Ocean from the Atlantic. And the North— 

the heat in the North Atlantic, which our people believe came from 

very active sunspots, really has a lot to do with this change, but 

we’re not spending much time trying to determine, really, is there 

anything we could do about it. 

I do think, Senator, we could do a few more studies to find out 

what really is causing the permafrost to be, you know, less thick. 

And we now know why the Arctic ice cap is shifting around; it’s because of the currents coming in from the North Atlantic. 

But I’ve got to tell you, Asia-Pacific Partnership, at $52 million, 

may be a good deal. I don’t know. But I know that cutting the 

money for the International Arctic Research Center, cutting the 

money for the Alaska Volcano Observatory—we’ve got one volcano, 

as you know, still spewing out, and yet we’re not going to monitor 

it anymore? I really think that something has to be done to look 

at the allocation of funds, and really support the kind of action 

that’s necessary in order to try to—to know more clearly what’s 

going to happen. It’s the prediction of what’s going to happen. 

Yesterday, as I understand it, the Weather Bureau told us we 

should get ready for another series of hurricanes in the southern 

States. Clearly, there’s a role for more action than we see. And I’m 

5 

sorry I can’t stay and be with you. I would have had some specific 

questions. 

I would urge you to take the time and sit down with a group of 

us and see if there isn’t some way that we can get better response 

to what we perceive to be the needs not only of research, but also 

of action to try to prevent any further damage to some of those villages, for instance. There’s no reason why we should not understand that they have a right just to have some action taken, just 

as the people of New Orleans and people that lived within the 

Katrina-affected area do. But—— 

So, I thank you for your statement. I will read it in full. But I 

share some of my colleagues feelings about this. 

Thank you very much. 

Senator VITTER. Senator Lautenberg is the Ranking Member of 

this Subcommittee. Senator, do you have an opening statement? 

STATEMENT OF HON. FRANK R. LAUTENBERG, 

U.S. SENATOR FROM NEW JERSEY 

Senator LAUTENBERG. Thanks, Mr. Chairman. 

I’m pleased that we’re having this review right now, because the 

problems are upon us. And at what point we decide that there’s serious danger, near ahead, that we get going? And I’m pleased to 

see Mr. Connaughton here and have a chance to review this together. 

Global warming, which I see as the thing that we want to get 

going about, concerns the whole world, especially concerns the 

States, Mr. Chairman, that you and I represent, and Senator Stevens, as well. And our States are threatened by hurricanes and rising sea levels, coastal erosion. And in our States, tourism and fishing industry make significant contributions to the States’ economy. 

Now, we’ve got witnesses here today, distinguished witnesses, 

and I look forward to hearing their views on the Asia-Pacific Partnership. 

However, I want to say, at this point, statements about global 

warming from the Administration have to be taken with a grain of 

salt. When George W. Bush was running for President the first 

time, he promised that he would support legislation to combat global warming by limiting carbon emissions from power plants. Once 

he took office, the silence fell. And since then, the Bush Administration’s record on global warming has been consistent. Unfortunately, it’s been consistently wrong. For 5 years, the Administration has dragged its feet on global warming, all the while insisting 

that there was no scientific consensus about whether or not action 

was needed. 

Now, we know that there has been rewriting on scientific findings at the White House to insert doubt where there was none intended by its authors. But they’ve censored career scientists, prevented them from speaking to the press, talking to the public about 

their views on their areas of expertise. They’ve allowed our Nation’s energy policy to be dictated by oil, power companies that 

have the most to gain from being allowed to continue emissions of 

greenhouse gases, while shutting out those who have the most to 

lose; and that is the American people. 

6 

They’ve even tried to block States from taking action to reduce 

vehicle emissions of greenhouse gases. And now the American people are being told that voluntary controls of greenhouse gases will 

be sufficient to ward off the effects of global warming. 

Mr. Chairman, TIME magazine recently did a cover story about 

global warming. The story makes clear that the debate about global 

warming is over. It is now time for action. There’s a broad consensus among scientists around the world that global warming is 

occurring, that it’s caused by human activity. There’s also increasing alarm that unless we act quickly, it might be too late to avoid 

catastrophic effects from global warming. 

The clock is running. Our window of opportunity to address global warming is rapidly closing. The longer we wait to take meaningful steps, the more costly these steps will be when we finally do 

take them. And I’m not here to attack the merits of working jointly 

with other countries, absolutely—on developing technologies to help 

reduce emissions of greenhouse gases. Certainly, science and technology must play a central role in reducing these greenhouse emissions. But we need to seriously consider whether the Administration’s response to global warming even begins to approach what we 

should be doing about a problem that threatens our entire planet. 

And, once again, I really do encourage us to work with other 

countries to see if we can do it. In particular, the focus here is on 

the Pacific area, and it should be, and especially listening to what 

Senator Stevens said about the change—the obvious change in temperature. At what point do we look outside and see snow disappearing in places, glacier—Glacier National Park, substantial reduction in the number of glaciers; Kilimanjaro, substantial reduction of the snow on top of the mountain—at what point do we say, 

‘‘Hey, we see it. How come we don’t believe it?’’ 

Mr. Chairman, thanks very much for holding this hearing. I look 

forward to hearing from our witness. 

Senator VITTER. Thank you, Senator. 

On the first panel today, we have the Honorable Jim 

Connaughton, Chairman of the Council of Environmental Quality 

at the White House. 

Jim, thanks for being here today, and we appreciate you taking 

the time to come up and testify on the Asia-Pacific Partnership. 

STATEMENT OF HON. JAMES L. CONNAUGHTON, CHAIRMAN, 

WHITE HOUSE COUNCIL ON ENVIRONMENTAL QUALITY 

Mr. CONNAUGHTON. Thank you, Mr. Chairman. Thank you, Senator Lautenberg, Senator McCain. 

It’s my pleasure to be here today to talk about the Asia-Pacific 

Partnership, and to talk about it in the context of many of the remarks that you just made in your opening statements. 

The Asia-Pacific Partnership on Clean Development and Climate 

was announced last year, last summer, and launched in January 

by President Bush and the leaders of Australia, China, India, 

Japan, and South Korea. Now, this is a public-private initiative 

that is establishing an innovative—and, actually, first-ever—collaboration of its type for addressing the interconnected challenges 

of assuring economic growth and development and poverty eradication in the context of addressing three combined goals: energy seVerDate Nov 24 2008 13:18 Jan 14, 2011 Jkt 63518 PO 00000 Frm 000010 Fmt 06633 Sfmt 06601 S:\GPO\DOCS\63518.TXT SCOM1 PsN: JACKIE
7 

curity, air pollution reduction, and mitigating the greenhouse gases 

associated with long-term climate change. 

What I want to do is give you a few essential concepts to the 

partnership, talk a little bit about the mechanics, and then just discuss very briefly the budgeting. 

On the essential concepts, first of all, I think it is well recognized 

that strong and growing economies are essential to making 

progress on all of these important issues—security, pollution reduction, and climate change—because it’s only through economic 

growth that we have the wherewithal, the financial resources, to 

make the investments in the transformational energy technologies 

that produce the results that we all desire. 

And, for all three members of the panel that are here right now, 

I think there’s raging consensus on forward progress. There’s raging consensus on the seriousness of these three issues and the need 

for taking action. And so, really, what the discussion has to be 

about is the various ways in which we can make substantial 

progress in the near-term, the mid-term, and the long-term. 

Another important theme is this notion of integration. We have 

found that looking at greenhouse gases in isolation is a mistake. 

It’s very important to look at the real-term health consequences of 

good old-fashioned air pollution, especially from fossil-fuel energy 

generation, also in the context of each of our countries’ imperatives 

of making—ensuring that we have security of our energy supply, 

upon which our livelihoods depend. 

A fourth theme, then, is this need—I’m sorry—third theme is the 

need for private-sector engagement. Government doesn’t make this 

happen. It is actually a massive investment. We’re talking about 

hundreds of billions and trillions of dollars of investment by the 

private sector that is what delivers the outcomes that we all share. 

And we have to engage the private sector in a way that is consistent with the way they do business in delivering good, clean 

technologies into not just marketplaces such as the U.S. and Japan, 

but getting them mass-produced and entered into marketplaces 

such as China and India. 

And then, fourth, any approach has to be a portfolio approach. 

And, by that, it’s a combination of mandatory measures, voluntary 

measures, and partnerships. And I would take issue with the characterization of what’s occurring here or anywhere else in the world 

as one or the other. That’s actually a false dichotomy. Each country 

that is working aggressively on this issue of climate change is 

working aggressively through a portfolio of measures, as I described. 

Now, in terms of the mechanics of the Partnership, the Partnership is directly in response to Title XVI of the Energy Policy Act 

of 2005 that enjoyed very substantial bipartisan support. It called 

for just this kind of action. 

These six countries represent 50 percent of the world’s population, 50 percent of the world’s economy, and 50 percent of the 

world’s fossil-fuel energy use and greenhouse gas emissions. It is 

a very important configuration of countries. 

We are united with our partners in recognizing that this requires 

not just a portfolio of actions, but also a portfolio of actors. For example, the United States, we have the Departments of State, EnVerDate Nov 24 2008 13:18 Jan 14, 2011 Jkt 63518 PO 00000 Frm 000011 Fmt 06633 Sfmt 06601 S:\GPO\DOCS\63518.TXT SCOM1 PsN: JACKIE
8 

ergy, Commerce, and the Environmental Protection Agency with 

leading roles in the partnership, but they will be supported by departments such as the Department of Transportation, the Department of Agriculture, and, most importantly, by our financing institutions, such as the Export-Import Bank and the Asia Development 

Bank. 

I was pleased to be in Sidney, Australia, for the launch of the 

partnership, which was hosted by Prime Minister Howard. To give 

you a sense of how important it was, China sent their number-five 

official to this discussion. We have found a way to engage China, 

which is something that has been elusive for over a decade. And 

we are working through eight different task forces, which are detailed in some length in my written testimony—eight task forces 

that are the ones that matter, the big, energy-intensive industry 

sectors, such as cement, steel, power generation, renewable- and 

distributed-energy generation, and, importantly, households and 

appliances—buildings and appliances. These task forces are going 

to be organized on a public-private basis to create the information 

flows that enable us to accelerate market-based investments in 

technology opportunities. 

If you would, Mr. Chairman, I just want to give one example of 

the kind of thing we’re talking about, to make it very specific. 

In the U.S., over the last 10 years, we have, through a great 

partnership organized by EPA, working with the Department of 

Energy, gone after methane emissions from coal mining, and from 

landfills, and from leaky natural gas production and distribution 

systems. This effort is a profitable enterprise, and we’ve done hundreds of projects, billions of dollars have been spent, and we have 

actually reduced our methane emissions. Methane is a safety hazard. It’s an air pollutant that contributes to ozone. And it’s a potent 

greenhouse gas, 20 times more powerful than CO2. Now, this has 

been done at a profit, with great success. 

China and India largely don’t do this right now. Something we 

can achieve through this partnership is to sit down with the leadership of China and India and several of the other countries and put 

on the table the hundreds—and I actually think it’s thousands—of 

methane projects that could occur tomorrow with existing technology, at a profit. That’s just something that hasn’t happened. 

And that’s what this partnership is going to be able to achieve, to 

put together those networks of investors, of technology providers, 

and policymakers, to produce an outcome on that scale. 

We can expect—we have a Methane to Markets Partnership, that 

preceded the Asia-Pacific Partnership, that, when successful, will 

cut greenhouse gas emissions by about 42 million metric tons. That 

one program alone is about a tenth of what the countries doing 

Kyoto would achieve if they met their targets. So, I just want to 

give you a sense of the scale of what we’re talking about, and the 

nature of what we hope to achieve. And that’s why the budget is 

important. These agencies need the resources to be able to enable 

these networks and unleash billions of dollars of private-sector investment. That’s a very good use of taxpayer resources. And it 

comes out of our already substantial $5 billion climate budget. 

So, thank you, Mr. Chairman. Thank you, Senator Lautenberg. 

And I look forward to your questions. 

9 

1http://www.whitehouse.gov/news/releases/2005/06/20050630.html. 

2Discussions of these various programs can be found on the following websites: 

The White House (http://www.whitehouse.gov/news/releases/2002/02/climatechange.html); 

Department of Energy (http://www.energy.gov/environment/climatechange.htm); 

Department of State (http://usinfo.state.gov/gi/globallissues/climatelchange.html); 

Department of Agriculture (http://www.ers.usda.gov/Briefing/GlobalClimate/); and 

Environmental Protection Agency (http://yosemite.epa.gov/oar/globalwarming.nsf/content/ 

Climate.html). 3http://www.fe.doe.gov/programs/powersystems/futuregen/. 

[The prepared statement of Mr. Connaughton follows:] 

PREPARED STATEMENT OF HON. JAMES L. CONNAUGHTON, CHAIRMAN, 

WHITE HOUSE COUNCIL ON ENVIRONMENTAL QUALITY

Mr. Chairman, thank you for inviting me to testify today on the Asia-Pacific Partnership on Clean Development and Climate, announced last year and launched in 

January by President Bush and the leaders of Australia, China, India, Japan, and 

South Korea. This public-private initiative establishes an innovative collaboration 

for addressing the interconnected challenges of assuring economic growth and development, poverty eradication, energy security, pollution reduction, and mitigating climate change. 

Shortly before the G8 meeting last year in Gleneagles, Scotland, President Bush 

said: 

The best way to help nations develop while limiting pollution and improving 

public health is to promote technologies for generating energy that are clean, 

affordable and secure. Some have suggested the best solution to environmental 

challenges and climate change is to oppose development and put the world on 

an energy diet. But at this moment, about two billion people have no access to 

any form of modern energy. Blocking that access would condemn them to permanent poverty, disease, high infant mortality, polluted water and polluted air. 

We’re taking a better approach. In the last 3 years, the United States has 

launched a series of initiatives to help developing countries adopt new energy 

sources, from cleaner use of coal to hydrogen vehicles, to solar and wind power, 

to the production of clean-burning methane, to less-polluting power plants. And 

we continue to look for more opportunities to deepen our partnerships with developing nations. The whole world benefits when developing nations have the 

best and latest energy technologies.1

Over the past 4 years, the Bush Administration has been building the structure 

of a more constructive, practical and realistic approach to international action on 

clean development and climate change. In February 2002, the President announced 

a comprehensive domestic and international strategy for addressing the serious, 

long-term challenge of global climate change through the development and widespread deployment of the best of current technologies and transformational new 

ones.2 This strategy is producing real results. 

In 2002, the President set a national goal of reducing the greenhouse gas intensity in the U.S. economy by 18 percent by 2012. We are committed to the logical 

steps of first slowing the growth of emissions per unit of GDP and, as the science 

justifies, stopping and then reversing emissions. We have established strong partnerships for action with the private sector, through programs such as the Department of Energy’s Climate VISION program and the Environmental Protection Agency’s Climate Leaders program. We have taken the lead internationally on transformational technology development initiatives such as the Hydrogen Fuel Initiative, which will accelerate the future of an emissions-free hydrogen transportation 

system, and FutureGen, a project to create the world’s first coal-based zero-emissions electricity and hydrogen power plant.3 Our wide variety of technology-based 

programs are being managed by the Climate Change Technology Program through 

the Department of Energy. 

Nearly every major provision of the Energy Policy Act of 2005 is helping to advance Presidential priorities for cleaner, more efficient, and less greenhouse gas-intensive energy systems, including incentives for production of wind, geothermal and 

solar power, consumer tax credits for highly fuel-efficient hybrid and clean diesel 

vehicles, clean coal technology, emissions-free nuclear power, and renewable biofuels. 

In addition to voluntary actions and incentives, the President’s strategy takes advantage of new mandatory efficiency and renewable fuels standards in the energy 

10 

4http://yosemite.epa.gov/oar/globalwarming.nsf/content/ 

ResourceCenterPublicationsGHGEmissionsUSEmissionsInventory2006.html. 5http://www.bea.gov/bea/dn/home/gdp.htm. 

6http://www.whitehouse.gov/news/releases/2001/06/20010611-2.html and 3http://www.whi 

tehouse.gov/news/releases/2002/02/20020214-5.html. 7 Energy Information Administration, International Energy Outlook, 2005. 

bill. Innovative new fuel economy regulations will save 10.7 billion gallons of fuel 

and include, for the first time ever, the largest sport utility vehicles and Hummers. 

And we are moving forward to carry out the President’s State of the Union vision 

to break our addiction to foreign oil through new technologies and to change the 

way we power our homes and offices. 

These new domestic programs and authorities will help us maintain the steady 

progress we have made in recent years toward the President’s greenhouse intensity 

goal. [Charts 1&2] Between 2000 and 2004, the U.S. economy grew 9.6 percent 

while greenhouse gas emissions increased only 1.1 percent.4,5 These reductions come 

from a combination of: (1) desirable improvements in efficiency and deployment of 

advanced energy technologies and practices, (2) a desirable structural expansion of 

our economy to lower-emitting manufacturing and service industries and enterprises, (3) the undesirable economic slowdown a few years ago, and (4) the undesirable shift of higher-emitting energy intensive industries and jobs to other countries 

with significantly lower energy costs. This last factor is problematic enough from the 

standpoint of those who lost jobs. As important, it probably did not produce an actual environmental benefit, as the air pollution and greenhouse gases emissions 

simply shifted to the other countries along with the jobs. The President’s policies 

are directed at accelerating the results from the first two factors, while guarding 

against the unsustainable or false sense of progress associated with the second two 

factors. 

As we seek to reduce our own emissions intensity, other fast growing economies 

of the world have significant opportunities to substantially reduce their emissions 

intensity. In his June 2001 and February 2002 climate change policy speeches, 

President Bush highlighted the importance of international cooperation in developing an effective and efficient response to the complex and long-term challenge of 

climate change.6 The international cooperation and investment that Title XVI of the 

Energy Policy Act of 2005 authorizes is essential to ongoing progress globally. Data 

collected by the Energy Information Administration reinforces the importance of 

continued partnership among mature and emerging economies on energy technology 

development and deployment. By 2010, carbon dioxide emissions from emerging 

economies, such as China and India, will surpass those from mature market economies like the United States.7 [Chart 3] 

That is why, last summer, the Administration introduced our most recent and 

consequential multilateral initiative, the Asia-Pacific Partnership for Clean Development and Climate. The six major nations in this partnership—Australia, China, 

India, Japan, South Korea, and the United States—account for about half of the 

world’s economy, energy use, and greenhouse gas emissions. In announcing the 

Asia-Pacific Partnership on July 27, 2005, President Bush said: 

This new results-oriented partnership will allow our nations to develop and accelerate deployment of cleaner, more efficient energy technologies to meet national pollution reduction, energy security, and climate change concerns in ways 

that reduce poverty and promote economic development. 

The Partnership’s vision statement, which is attached, identifies a broad range of 

near-and longterm technologies and practices that are designed to improve energy 

security, reduce pollution and address the long-term challenge of climate change. 

The Partnership focuses on voluntary practical measures to create new investment 

opportunities, build local capacity, and remove barriers to the introduction of cleaner, more efficient technologies. It is important to build on mutual interests and provide incentives to tackle shared global challenges such as climate change effectively. 

We are united with our partners in recognizing that the ingenuity and energy of 

the private sector is crucial to our success in addressing these issues over time. This 

effort cannot succeed without strong private sector involvement. The Departments 

of State, Energy, Commerce, the Environmental Protection Agency, and other agencies and financing institutions, such as the Export-Import Bank and Asian Development Bank, are actively discussing ways of ensuring that the private sector is engaged in a meaningful way in the Partnership at every stage of its work. 

This past January, I was privileged to join Energy Secretary Sam Bodman and 

Under Secretary of State Paula Dobriansky at the first Ministerial meeting of the 

Partnership in Sydney, Australia. The meeting was hosted by Australian Prime 

11 

8http://www.epa.gov/cleanairinterstaterule/. 

Minister John Howard and chaired by Australian Foreign Minister Alexander 

Downer. In addition to involving unusually high-ranking government official representation, the meeting also included a substantive dialogue with leading CEOs 

and heads of industrial organizations from each country representing some of the 

most significant, energy-intensive and emitting sectors. 

The Ministerial established a Policy and Implementation Committee and its first 

set of Task Forces covering actions in eight areas: 

• Cleaner Fossil Energy 

• Renewable Energy and Distributed Generation 

• Power Generation and Transmission 

• Steel 

• Aluminum 

• Cement 

• Coal Mining 

• Buildings and Appliance 

Each Task Force has a government Chair and Co-Chair. [Chart 4] The United 

States will chair the Policy and Implementation Committee and Chair or Co-Chair 

three of the Task Forces. Initial details about the objectives and work plans for each 

task force are outlined in the accompanying charts. [Charts 5.1–5.8] We anticipate 

each Task Force to consist of two senior government officials and two private sector 

leaders from each country to enable a relatively manageable planning and implementation dialogue of about 24 people per Task Force. The United States Task 

Force members include participants from government agencies, major companies, 

and nonprofit organizations. 

In a few weeks, the United States will host the first Task Force working meetings. The Task Forces currently vary in their level of organization and planning. 

The aluminum sector, for example, has already adopted a Memorandum of Understanding as to how they intend to proceed. This is not surprising, as this sector is 

already well-organized internationally and involves large multi-national companies. 

On the other hand, sectors such as cement and power generation are composed predominantly of domestic companies, that infrequently, if ever, have had reason to get 

together and share management strategies, relevant sector goals, best practices, 

technologies and financing arrangements. For many, the Asia-Pacific Partnership 

will afford the first opportunity for such hands-on, senior-level exchanges. 

At the first working group meetings and in the months that follow, we expect the 

Partners to develop a broad portfolio of shared goals and objectives. Let me outline 

a few of my own personal thoughts concerning the kinds of deliverables the Task 

Forces will explore. 

A principal, operational objective of the Partnership is to identify profitable technology investment opportunities and outcomes in each partner country. While there 

may be discussion of ‘‘demonstration projects’’ related to emerging technologies in 

each sector, we are placing a strong emphasis on identifying opportunities for nearterm outcomes that can be ‘‘mass-produced’’ using tried-and-true technologies and 

methods. 

For example, methane capture from coal mining is a well-established and highly 

profitable practice in the United States that nets significant benefits in terms of 

worker safety, harmful pollution reduction, and mitigation of a greenhouse gas that 

is 20 times more potent than carbon dioxide. The potential number of such projects 

in several of the other partner countries is quite high. Our partner countries also 

have a strong interest in our substantial experience and success in improving the 

efficiency and capacity of our power generation. Out of such discussions should 

emerge a fairly concrete list of information, policy, economic, and regulatory barriers 

to such investment and corresponding actions to address such barriers. 

To give another example, in order to comply with our new Clean Air Interstate 

Rule mandating about a 70 percent reduction in harmful air pollution, our power 

generation utilities are projected to invest about $50 billion to install and operate 

pollution controls and efficiency improvements at existing and new plants.8 Details 

of this rule and the market it will expand for current and new technologies are 

largely unknown to our partner countries, who may want to replicate it back home 

or produce innovative control technologies that can be marketed to our power sector. 

Similarly, according to recent reports, China has announced a commitment to improve the efficiency of its power generation by 20 percent by 2010 and to cut the 

sulfur-dioxide emissions from a significant portion of its power plants. This remarkVerDate Nov 24 2008 13:18 Jan 14, 2011 Jkt 63518 PO 00000 Frm 000015 Fmt 06633 Sfmt 06621 S:\GPO\DOCS\63518.TXT SCOM1 PsN: JACKIE
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9http://www.climatevision.gov/. 

ably ambitious objective will create another strong market force for new investment 

in technologies and services. 

Another opportunity is the prospect of a better, shared inventory of each country’s 

capabilities and commitments in key sectors. For example, Japan has a highlyevolved, voluntary program of greenhouse gas mitigation goal-setting and implementation involving each of its major emitting sectors. President Bush’s Climate VISION and Climate Leaders programs share common elements with the Japanese 

program.9 Closer alignment and amplification of these approaches, while ensuring 

their relevance to each country’s national circumstances, would be very valuable. 

Another area of importance is the potential for further development of capacity 

to accurately monitor and measure performance across a number of metrics and sectors. While at different points on the continuum, each of the six countries is working 

aggressively to improve its ability to track improvements in efficiency, air quality 

and greenhouse gas emissions. Such capacity is essential to ensuring integrity, consistency, and cost-effectiveness of results. 

Finally, we are working to ensure the focused and active engagement of public 

and private financing institutions. The operational success of this effort should be 

measured not by how much governments and their taxpayers spend on the effort, 

but on how much new private sector investment and financing can be unleashed 

and accelerated to achieve partnership security and environmental performance 

goals. The U.S. Department of Commerce and our Export-Import Bank are already 

working on business plans and trade promotion exchanges focused on Partnership 

priorities. And the head of the Asian Development Bank participated in the Ministerial launch of the Partnership in Australia. 

The Asia-Pacific Partnership and our other international engagements on climate 

change center on five key ideas, all of which extend from and build on our own experience here in the United States. First, a successful international response to climate change requires developing country participation, which includes both nearterm efforts to slow the growth in emissions and longer-term efforts to build capacity for future cooperative actions. Absent the participation of all major emitters, including developing countries, the goal of stabilizing GHG concentrations will remain 

elusive. 

Second, we will make more progress on this issue over time if we recognize that 

climate change goals fall within a broader development agenda—one that promotes 

economic growth, reduces poverty, provides access to modern sanitation and clean 

water, enhances agricultural productivity, provides energy security, reduces pollution, and mitigates greenhouse gas emissions. Countries do not look at individual 

development goals in a vacuum, and approaches that effectively integrate both nearand longer-term goals will yield more benefits over time. 

Third, technology is the glue that can bind these development objectives together. 

By promoting not just the development but also the wide spread commercialization 

and use of cleaner and more efficient technologies, we can meet a range of diverse 

development and climate objectives simultaneously. 

Fourth, we need to pursue our international efforts in a spirit of collaboration, not 

coercion, and with a true sense of partnership. This is especially true in our relations with developing countries, which have an imperative to grow their economies 

and provide for the welfare of their citizens. Experience has shown these countries 

to be quite skeptical of climate mitigation approaches that they think will divert 

them from these fundamental goals. It is also true that many of the largest greenhouse gas emitters are also among our most significant trading partners. They have 

rapidly advancing—in many cases, world class—industries and considerable technical wherewithal. We view countries like China and India as responsible partners 

in our efforts. 

Finally, we need to engage the private sector to be successful. While the right 

kind of government-to-government collaboration can pave the way for great 

progress, we will need to harness the ingenuity, resources and vision of the private 

sector in developing and deploying technology. The President’s FY07 budget calls for $52 million to support the work of the Partnership. The request is divided among the Departments of State, Energy and Commerce, and the Environmental Protection Agency. Other agencies, such as the Departments of Transportation and Agriculture, will also be participating. The Partnership is a team effort and requires a team budget. 

In addition to the Asia-Pacific Partnership, since 2001, we have established a 

range of partnerships that will address key aspects of the climate challenge while 

also advancing other important international objectives. We have established bilateral climate partnerships with 15 countries and regional organizations that, toVerDate Nov 24 2008 13:18 Jan 14, 2011 Jkt 63518 PO 00000 Frm 000016 Fmt 06633 Sfmt 06621 S:\GPO\DOCS\63518.TXT SCOM1 PsN: JACKIE
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10http://earthobservations.org/. 11http://iwgeo.ssc.nasa.gov/docs/EOCStrategiclPlan.pdf. 12http://www.nei.org/index.asp?catnum=3&catid=1215. 13http://www.cslforum.org/. 14http://www.iphe.net/. 15http://www.iter.org/. 16http://www.epa.gov/methanetomarkets/ and http://www.methanetomarkets.org/. Founding 

Methane to Markets member governments include the United States, Argentina, Australia, 

Brazil, China, Colombia, India, Italy, Japan, Mexico, Nigeria, Russian Federation, Ukraine, and 

the United Kingdom. The Republic of Korea became the 15th member in June 2005, Canada 

the 16th member in July 2005, and Ecuador the 17th member in November 2005. 17http://www.sdp.gov/sdp/initiative/cei/28304.htm. 

gether with us, comprise some eighty percent of global greenhouse gas emissions. 

These partnerships serve as the umbrella for over 400 collaborative activities undertaken by U.S. agencies and their partners on science, technology and policy issues. 

Through these partnerships, U.S. experts are working with Australia and New Zealand to strengthen our capacity to monitor climate in the Pacific; with India to promote local-level pollution and energy solutions that will have greenhouse gas intensity benefits; with Brazil to promote effective application of renewable energy; with 

Japan and Korea to promote greater integration of climate and energy strategies 

throughout Asia; and with China to enhance technical capacity for climate-related 

decisionmaking. 

In addition to our bilateral partnerships, we have initiated and participate in a 

range of new technology initiatives designed to meet climate and clean development 

goals. Let me briefly highlight a few of the most significant partnerships: 

• Group on Earth Observations: 10 On July 31, 2003, the United States hosted 33 

nations—including many developing nations—at the inaugural Earth Observation Summit (EOS), out of which came a commitment to establish an intergovernmental, comprehensive, coordinated, and sustained Earth observation system. The climate applications of the data collected by the system include the 

use of the data to create better climate models, to improve our knowledge of 

the behavior of carbon dioxide and aerosols in the atmosphere, and to develop 

strategies for carbon sequestration. The United States was instrumental in 

drafting a ten-year implementation plan for a Global Earth Observation System 

of Systems, which was approved by 55 nations and the European Commission 

at the 3rd EOS summit in Brussels in February 2005. The United States also 

released its contribution through the Strategic Plan for the U.S. Integrated 

Earth Observing System in April 2005.11 The plan will help coordinate a wide 

range of environmental monitoring platforms, resources, and networks. 

• International Energy Research and Development Partnerships: The Generation 

IV Nuclear partnership,12 the Carbon Sequestration Leadership Forum,13 the 

International Partnership for the Hydrogen Economy,14 and ITER.15 In the last 

4 years, the Administration has engaged in four partnerships that lend new 

international emphasis to strategic technologies that can make a large contribution to our efforts to reduce greenhouse gas intensity and diversify the global 

energy portfolio. The State Department is working closely with DOE to engage 

our partners, and all of these partnerships include key developing countries as 

full partners in our efforts to advance these important technologies—an important capacity building function that will also serve to promote the growth of 

global markets. 

• The Methane to Markets Partnership: 16 This Partnership, launched in November of 2004, focuses on advancing cost-effective, near-term methane recovery 

and use as a clean energy source to enhance economic growth, promote energy 

security, improve the environment, and reduce greenhouse gases. At the recent 

session, the partnership welcomed its seventeenth member, Ecuador, and now 

represents over 60 percent of global methane emissions. This Partnership includes an extensive project network comprised of 190 private sector, governmental and non-governmental organizations. Methane to Markets currently targets four major methane sources: landfills, underground coal mines, natural gas 

and oil systems, and animal waste management. By 2015, the Partnership has 

the potential to deliver annual reductions in methane emissions of up to 50 million metric tons of carbon equivalent or recovery of 500 billion cubic feet of natural gas. 

• World Summit on Sustainable Development Partnerships: 17 The United States 

has been at the forefront of efforts to move multilateral bodies toward a practical, results-focused actions centered around partnerships among governments, 

businesses and other organizations. Among over 20 U.S.-initiated partnerships 

14 

18http://www.sdp.gov/sdp/initiative/cei/44949.htm. 19http://www.sdp.gov/sdp/initiative/cei/29808.htm and http://www.pciaonline.org/. 20http://www.sdp.gov/sdp/initiative/cei/29809.htm and http://www.unep.org/pcfv/main/ 

main.htm. 21http://www.sdp.gov/sdp/initiative/cei/28304.htm. 22http://usinfo.state.gov/ei/img/assets/4756/PostG8lGleneagleslCommunique.pdf. 

launched at the 2002 World Summit on Sustainable Development (WSSD) held 

in Johannesburg, South Africa, the United States established a ‘‘Clean Energy 

Initiative.’’ The Initiative consists of four market-oriented, performance-based 

partnerships, including: 

—the Global Village Energy Partnership (GVEP), 18 an international partnership with over 700 public and private sector partners with a leading role for 

the U.S. Agency for International Development; 

—the Partnership for Clean Indoor Air, 19 led by the Environmental Protection 

Agency, addressing the increased environmental health risk faced by more 

than 2 billion people in the developing world who burn traditional biomass 

fuels indoors for cooking and heating; 

—the Partnership for Clean Fuels and Vehicles, 20 led by the Environmental 

Protection Agency, which will help to reduce air pollution in developing countries by promoting the elimination of lead in gasoline and encouraging the 

adoption of cleaner vehicle technologies; and 

—Efficient Energy for Sustainable Development (EESD), 21 led by the Department of Energy, which aims to improve the productivity and efficiency of energy systems, while reducing pollution and waste, saving money and improving reliability through less energy intensive products, more energy efficient 

processes and production modernization. 

The United States is actively involved in other international technology development and deployment partnerships as well, including the Renewable Energy and 

Energy Efficiency Partnership, a WSSD partnership initiated by the United Kingdom. As the world’s largest producer and consumer of renewable energy, and with 

more renewable energy generation capacity than Germany, Denmark, Sweden, 

France, Italy, and the United Kingdom combined, the United States is one of 17 

partner countries in REEEP. 

The technology-focused approach that puts climate change in the context of broader development goals is finding favor in many parts of the world. In July, at the 

Group of Eight Leaders meeting at Gleneagles, President Bush and his counterparts 

agreed to a Plan of Action on Climate Change, Clean Energy and Sustainable Development. 22 The Plan is based on over fifty specific, practical activities, mostly focused on technology development and deployment. 

The United States continues to participate in the U.N. Framework Convention on 

Climate Change. The Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change held its 11th Session in Montre ́al from November 28 to December 9, 2005. In that context, we will continue to highlight the importance of collaborative partnerships developing and deploying technologies to meet 

the long-term challenge of climate change. 

I thank you for the opportunity to testify. I look forward to responding to any 

questions you may have. 

15 


con1.eps
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con2.eps
17 


con3.eps
18 


con4.eps
19 


con5.eps
20 

Senator VITTER. Thank you, Chairman Connaughton. 

I understand you have a number of Federal agencies with you 

today to help answer questions. At this point, maybe it would be 


con6.eps
21 

appropriate for you to introduce those representatives, in case any 

of our questions are directed at them. 

Mr. CONNAUGHTON. Thank you, Mr. Chairman. 

I have with me Steve Eule—Steve?—who is the Director of the 

Climate Change Technology Program. I have Joey—and he’s—I 

have—and he’s from the Department of Energy—I have Joey 

Neuhoff, who’s the Director of the Office of Energy and Environment, from the Department of Commerce. Joey? I want to underline ‘‘Commerce.’’ It’s very essential that our trade promotion activities advance the objectives of this partnership. I have Aaron 

Brickman, from the Office of Energy and Environment, from the 

Department of Commerce. And I have Trigg Talley, from the Department of State, the Office of Oceans, Environment, and Science. 

Senator VITTER. Great. 

OK, Mr. Chairman. As I said in my opening statement, one of 

the daunting things about this whole issue, when you look at it, is 

what developing countries like China and India plan over the next 

few decades—China, 800 coal-fired power plants, without the benefit of clean coal or gasification. Obviously, for that to change, this 

sort of initiative has to be meaningful, and there needs to be real 

buy-in and real involvement from countries like that. What is your 

view, so far, about how meaningful that buy-in really is, given that 

to make a difference it’s going to have to change some major plans 

that they might otherwise have in the next several decades? 

Mr. CONNAUGHTON. Well, let me start with the situation, which 

is, when I started my job, you were looking at the major emerging 

economies’ greenhouse gas emissions exceeding ours sometime 

around 2020. Well, the projection now is they will exceed the developed world’s emission profile by 2010. So, that’s how fast things are 

changing there. It’s also the case, for example, that the air pollution in China today—they release as much air pollution today as 

the U.S. did at its peak. And China’s economy is only a fraction of 

our economy. And I want to continue to make this point. Air pollution matters, as do greenhouse gases. 

So, now to the seriousness. I do think that China is hit—has hit 

a turning point, based on my visits there, at very high levels. And 

I think the best indicator of that is, for the first time in their 11th 

5-year plan, they have made a specific commitment that they are 

formalizing right now. And I think it’s this. We can confirm this. 

But they’re committed to improving the efficiency of their fossilfuel-fired power plants by 20 percent by 2010. And they’ve made 

a commitment to desulphurize 46 percent of their power plants. 

That’s a big deal, for China to say something like that, that publicly. 

I have spoken with the individuals responsible for the plan. They 

are putting in place the mechanisms for moving forward. But 

China is kind of like where America was in the mid-1970s. The 

commitment was there, but the institutions and the actions— 

they’re in the formative stage of really pulling it off. 

Now, interestingly, China is going to achieve that through 

straight, good, old-fashioned management. They’re going to mandate a bunch of investments. But they also have some regulatory 

programs that will achieve this, as well. They have a program on 

air pollution that looks a little bit like our New Source Review ProVerDate Nov 24 2008 13:18 Jan 14, 2011 Jkt 63518 PO 00000 Frm 000025 Fmt 06633 Sfmt 06601 S:\GPO\DOCS\63518.TXT SCOM1 PsN: JACKIE
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gram. The issue for them is, Does it have teeth? And our EPA is 

working very diligently with them to develop the same kind of aggressive monitoring and compliance regime in their country that 

we enjoy in this country. 

So, we’re at a turning point, but the proof is in the pudding. And 

this Partnership is going to create a situation of joint accountability, and, importantly, joint constructive action, going forward. 

Again, we have found a way—a positive platform to advance these 

initiatives, rather than trying to, you know, litigate or negotiate toward some of these outcomes. 

Senator VITTER. Now, there are clearly a number of other venues 

for multilateral global climate change cooperation—the G8, the 

Framework Convention, Methane to Markets, et cetera. How does 

this initiative fit into all that? And give us some reassurance that 

we’re just not cluttering, you know, the landscape with yet another 

initiative, when other venues already exist. 

Mr. CONNAUGHTON. Let me start with the end of your question, 

Mr. Chairman, which is—we need dozens, and, ultimately, hundreds, of initiatives like this. And so, we can’t have too many, in 

that sense, because as we get to the ground level, you know, we 

have issues in steel, and in manufacturing, and we need lots of this 

kind of activity. 

I would characterize the Asia-Pacific Partnership as now being 

on the leading edge, though. By only having six countries, and with 

focused task-force activities, we can actually achieve more, in real 

terms. By contrast, the Kyoto process, there are 189 countries, with 

climate experts who largely don’t have operational responsibility 

for any of the outcomes. So, that’s a very huge process to try to get 

a conversation going in. Six is a lot easier. And each of these task 

forces will have about 24 people on them. Now, that’s the kind— 

with budget and responsibility—that’s the kind of conversation that 

we need to replicate more and more. 

In the G8, the task forces—the partnership is perfectly consistent 

with the G8 leaders’ agreement that we need to address these 

issues in an integrated way, and the call for more work with developed countries—so, it’s accomplished that. And then, it’s—you 

know, Methane to Markets is a good example, where we will 

achieve some of the Methane to Markets approach through the 

partnership, even as we work with some of our European counterparts and counterparts in the southern hemisphere on a bilateral 

basis to achieve methane reductions there. 

So, it’s a big set of issues to manage, and we’re—we have an integrated committee in the Administration whose job it is to make 

sure that these pieces are moving in synchronization with each 

other. 

Senator VITTER. OK. I’m somewhat concerned about the amount 

of money we spend in the Federal budget on climate change, and 

what we’re getting for it, $5 billion, when you add up everything 

together. That is a major amount of money. I’m not sure exactly 

what we’re getting for it is the best investment and how coordinated and focused, in an overall way, that effort is. Can you talk 

about that and how the APP fits into that overall effort? 

Mr. CONNAUGHTON. We have $5 billion. About $2 billion is dedicated to climate science. That’s as much as the rest of the world 

23 

commits to the issue. The U.S. is a clear leader there. And the 

President’s budget is increasingly reflecting the priorities that were 

given to us by the National Academy of Sciences and then that 

have worked their way into our new 10-year Science Strategic 

Plan. 

Our Nation never had a Science Strategic Plan before. We had 

a very intensive process, involving more than 1,000 scientists, to 

develop that. And now, hopefully working even more closely with 

the Congress, we need to get that $2 billion budget better aligned 

with the priorities that the scientists have identified. 

On the technology side, the last 4 years were really about new 

transformational technologies, like hydrogen, very-low- or zero-pollution coal. These are technologies that are, you know, a few years 

away. I think the conversation in the next—that—and so, this $3 billion 

is going toward these very big technology opportunities. And so, it’s 

very important to sustain that funding. And that is now being done 

in a very—with a very transparent technology plan that some 

have—some love, some have criticism of. But it’s an organized plan, 

for the first time. 

The next 4 years, though, from our perspective, has to now really 

look at these near-term or close-to-near-term opportunities for investment. You know, it was right to spend our time on the longerterm bets to get it moving, but now we can look at things like 

methane, efficiency in power generation, these profitable investment streams, and start to get some real delivery in results next 

year, the year after that, even as we hope for things like hydrogen, 

cellulosic ethanol, and some of these other items that are in the recent energy bill as they come online, you know, a few years hence. 

Senator VITTER. Great. 

Senator Lautenberg? 

Senator LAUTENBERG. Thanks, Mr. Chairman. 

Mr. Connaughton, I get the sense, listening to you, that we’re 

hard at work on trying to make sure that, in the future, other nations contribute to the problem—solving the problem of greenhouse 

gases and global warming, the environmental pollution. Is it not 

true that we, in America, 4 percent of the population of the world, 

create about 25 percent of the greenhouse gases? 

Mr. CONNAUGHTON. I don’t have the exact figure. I think you’re 

close. Our greenhouse gases are a lower percentage than our economic output, but it should not be—— 

Senator LAUTENBERG. Well, you’re not representing the budget 

here, you’re representing the environmental side. So, I understand 

about the budget, and I understand about business. I come out of 

the corporate world, and all that. I want to get to what point in 

time you think there’s a real alarm that ought to be sounded. At 

what point in time do we observe the disappearance of species? At 

what point in time do we see countries that are—areas that were 

constantly under snow and ice disappearing in front our eyes and 

say, ‘‘You know what?’’—yes, this is a good idea, the partnership, 

but, at what point in time do we, here in America, invest in making sure that we do what we can to protect the children of the future, my grandchildren and anybody else’s grandchildren sitting 

out there? At what point—— 

24 

Mr. CONNAUGHTON. The point in time—— 

Senator LAUTENBERG.—in time? 

Mr. CONNAUGHTON. The point in time, Senator, was 1992, with 

the signing and ratification of the Framework Convention on Climate Change, and today, and tomorrow, and in the coming decades. The time is now. 

Senator LAUTENBERG. Yes. So, what is in place now? If we can 

contribute, as we do, to this large volume of greenhouse gases—I 

was in the Brazil once, on a Earth Summit, and I talked to an interior minister down there and asked them to please help us understand why they’re burning the Amazon forests. And he said, ‘‘Well, 

one of our farmers will burn an acre of land to sustain his family 

of four for life. And one of your workers in a chemical plant can 

create that much pollution in a single day. If you want us to stop 

burning the forests, then you make a contribution. You sustain this 

farmer, and we’ll make sure that for every farmer that you—whose 

life you help improve, that we’ll stop burning the forest. That’s not 

your territory. It’s our territory, and we’ll take care of ourselves.’’ 

But I don’t see it happening in our country. And when your 

former Chief of Staff edits reports by climate scientists to undercut 

their findings about global warming, did he have the technical 

background? Did he have the authority to redact those findings, the 

ones that were put out by the scientists from NASA? Is that the 

kind of conduct that we salute in our country, that if you don’t 

agree with the outcome, change the words? 

Mr. CONNAUGHTON. Let me take the first question first, and then 

I’ll answer the second one. 

Senator LAUTENBERG. Talking about Phil Cooney, right? 

Mr. CONNAUGHTON. Phil Cooney, that’s correct. 

Let me answer the first one. In my testimony, I provided an extensive discussion of the wide variety of actions that are occurring 

in the context of Federal programs. We have dozens of Federal programs, starting in 1992, initiated by the first President Bush, 

new—programs developed new by the Clinton Administration, and 

we have added a whole raft of programs, as well, under the Bush 

Administration. So, we are building this portfolio I described. 

Just at Federal facilities alone, Senator, we have the new Federal Energy Management Plan. Courtesy of the Congress, the Federal Government can now write energy savings contracts. We are 

busily out there doing it. And what that means is, the private sector pays to install efficiency equipment at Federal Government facilities at no cost to the taxpayer. We share the energy savings 

with the private-sector entity that does it. We get a massive improvement in efficiency. We also offset the greenhouse gases—— 

Senator LAUTENBERG. Will our air improve? Has there been a reduction, as of now, in greenhouse gas? Or is—are the reductions in 

those that were about to occur? 

Mr. CONNAUGHTON. Not only are we getting greenhouse gas reductions with each new investment in efficiency at Federal facilities, but if we stay on track with this plan—and we—this Administration is dedicated to doing that—— 

Senator LAUTENBERG. How much do the Federal facilities contribute to the total emission of greenhouse gas? 

25 

Mr. CONNAUGHTON. Let me just give you an example, Senator. 

This program is projected to reduce the greenhouse gas output of 

the Federal Government alone by about 42 million metric tons. Let 

me put that in perspective. The Kyoto process will generate about 

a 500-million-metric-ton reduction. This is almost a tenth of that, 

just from Federal—U.S. Federal Government facilities alone, at a 

net savings to the taxpayer and through innovative products being 

sold by the private sector. See, it’s these kinds of policies that can 

produce big-ticket outcomes. And that’s what we’re looking at. 

I could go on at length over these—— 

Senator LAUTENBERG. Yes, I know you could. 

Mr. CONNAUGHTON.—dozen programs. 

Senator LAUTENBERG. I know you could. And I—— 

Mr. CONNAUGHTON. But—— 

Senator LAUTENBERG.—appreciate it, but that’s not—want to 

know is, At what point do we say that we’ve started to gain on 

this? At what point have we slowed the deterioration of the atmosphere? 

Mr. CONNAUGHTON. The current data, through 2004—so, if you 

take the period from 2000 to 2004—for several reasons, good and 

bad, that I outline in my testimony, the United States has slowed 

the growth of its greenhouse gas emissions substantially. The first 

step is to slow them down. 

Senator LAUTENBERG. Slowed the growth. 

Mr. CONNAUGHTON. Just like we did on air pollution, all the way 

through the 1970s and 1980s. 

Senator LAUTENBERG. Have we reduced the quantity that’s being 

emitted now? If we look at last year and the year before and the 

5 years before that, have we reduced the quantity of greenhouse 

gases that are being emitted in our country? 

Mr. CONNAUGHTON. We have a significant net reduction of methane, a significant net reduction of some of the specialty gases, 

like—— 

Senator LAUTENBERG. Carbon? 

Mr. CONNAUGHTON.—like PFCs, perfluorocarbons. 

Senator LAUTENBERG. Carbon? 

Mr. CONNAUGHTON. We still have carbon dioxide increasing, but 

it is increasing at a declining rate. That is exactly the pathway we 

want to see. Let me give you the statistics. Our economy has grown 

by about 9.5 percent since 2000, and yet our carbon greenhouse 

gases and the other net greenhouse gases have grown only 1.1 percent. That is a very important step, that we’re able to have economic growth with much fewer greenhouse gases. 

Senator LAUTENBERG. So, the green—the obvious thing is that, 

more than anything else, we want the economic growth. 

Mr. CONNAUGHTON. No. We need both, Senator. 

Senator LAUTENBERG. We need both. But one is outpacing, in my 

view, the thought process and the behavior of our interest in controlling the—— 

Why were those reports that—the report that was written, authored by—what was his name? He’s the—no, the scientist from 

NASA—yes—redacted? And why was Mr. Cooney involved in 

changing language? Can you tell me that? 

26 

Senator VITTER. If I can ask for a quick answer on that, and then 

we’re going to take a brief recess for some floor statements and activity on immigration, and we’ll come right back, and we can pick 

it up wherever you leave off, Mr. Connaughton. 

Mr. CONNAUGHTON. Right, thank you, Mr. Chairman. 

Mr. Cooney was part of a very extensive interagency review process that included policy advisors, lawyers, scientists, and other officials across the board. The ultimate part of that policy process is 

reviewed by the science officials in charge of those documents. 

Some edits were accepted, some edits were rejected. That’s true of 

all of us, including me. And so, we have an interactive process. The 

report went out publicly in 2003. When it went out, the substance 

of the report, we didn’t hear much about it, so it seemed right. And 

the process of editing is a process that occurs all across the Government at all levels. Mr. Cooney was an important contributor to that 

process. 

Senator VITTER. We’re going to take a quick recess for some floor 

activity on immigration. The leader is making a statement that I 

want to be there for. Senator, do you have more questions for Mr. 

Connaughton, or shall we release him and go on to the second 

panel? 

Senator LAUTENBERG. I’d like to—— 

Senator VITTER. It’s completely up to you. 

Senator LAUTENBERG.—I’d like to continue. How long a—— 

Senator VITTER. Shouldn’t be that long. I would hope it would be 

less than a half an hour. 

We’ll take a recess for—— 

Senator LAUTENBERG. Are you available? 

Mr. CONNAUGHTON. I believe so. Let me—half an hour. Yes, I 

have a little time after that. 

Senator VITTER. OK. We’ll take a brief recess, and I’ll return absolutely as quickly as I can. 

Thank you very much. 

[Recess.] 

Senator VITTER. At this time, we’ll resume. And I want to apologize for keeping you here, apparently for no reason, now, in retrospect. So, I’m very sorry for that delay. I’ll ask Senator Lautenberg, 

the Ranking Member, to follow up with you on any further questions. 

Thank you very much for being here. 

Mr. CONNAUGHTON. Thank you, Mr. Chairman. And, again, I appreciate your holding this hearing to get more information about 

the actions we’re taking. And, in addition to questions in writing, 

I’d be happy to sit down, one-on-one, with any of the Members of 

the Subcommittee, and give them whatever time they need to make 

sure that they are fully educated on these consequential activities. 

They’re going to make a real difference all around the world. 

Senator VITTER. Great. Thank you very much. 

And now I’d like to invite up our second panel. 

[Pause.] 

Senator VITTER. I want to welcome our second panel. And I’ll introduce them all, at this time. Dr. Margo Thorning is Managing Director of the International Council for Capital Formation. Dr. 

David Montgomery is Vice President of CRA International. And we 

27 

also have Mr. David Doniger, Policy Director of the Climate Center 

with the Natural Resources Defense Council. 

Welcome to all of you. And we’ll begin with Dr. Thorning. 

STATEMENT OF DR. MARGO THORNING, 

MANAGING DIRECTOR, INTERNATIONAL COUNCIL 

FOR CAPITAL FORMATION 

Dr. THORNING. Thank you, Mr. Chairman. I appreciate the opportunity to submit the statement for this record. 

I’m Margo Thorning, Managing Director of the International 

Council for Capital Formation, a Brussels-based think tank whose 

goal is to promote market-based solutions based on cost-benefit 

analysis to address economic and environmental issues. The ICCF 

is an affiliate of the American Council for Capital Formation. 

We appreciate the opportunity to comment on the goals of the 

Asia-Pacific Partnership and the positive impact that voluntary 

programs, in contrast to mandatory programs, can have in reducing 

greenhouse gas emissions. 

I think it’s useful to take a look at how our allies in Europe are 

doing with their mandatory approach to reducing greenhouse 

gases. The EU’s emission trading system covers approximately 

12,000 emitters, and those are responsible for about 40 percent of 

total greenhouse gas emissions in the EU. The European Environmental Agency shows that the EU is not on track to meet their 

Kyoto target. They are expected to be 4 percent above 1990 levels 

of emissions, rather than 8 percent below, as required by the Kyoto 

Protocol. 

If you’re interested in individual country studies of what the economic impact would be of a mandatory system that covered all sectors of the EU, those are available at the ICCF’s website, 

www.iccfglobal.org. The U.S. is actually doing better, in terms of reducing emissions 

intensity, than is the EU. If you take a look at Figure 2 in my 

statement, which I would appreciate being submitted for the 

record, you can see that since—over the 1997–2003 period, U.S. has 

reduced its emissions intensity by over 12 percent, compared to 

only 7 percent in the EU. So, with our voluntary system, we’re actually making more progress in reducing emissions intensity, while 

continuing to grow our economy strongly, than is the EU. 

Another issue to think about is, Will mandatory targets drive the 

investment in new energy-efficiency technology that will be the key 

to reducing greenhouse gas emissions? If investors are forced to 

make near-term end-of-pipe solutions to curb emissions in the 

short-run, that will divert resources that are needed to focus on 

long-term spending on R&D. Even—it’s also very difficult for an investor to have confidence in a mandatory target. A current government really can’t bind a future government as to either emission 

targets or as to safety-valve prices. 

Third, the U.S. population is growing. It’s expected to grow about 

20 percent over the next 20 years. In the EU, population is not 

growing much at all. So, even with their stagnant population, 

they’re not able to meet their Kyoto targets. So, that is something 

to be considered when looking at a mandatory system, as opposed 

to voluntary. 

28 

I think the focus of the current Administration’s policy, which is 

based on incentivizing new technology, is probably the most productive way to try to address the potential threat of climate 

change. You might be interested in Table 2 in my submission, 

which compares the EIA—DOE EIA’s simulation of a high-tech— 

faster high-tech penetration over the 2020–2030 period with that 

of a mandatory cap-and-trade program. The EIA data suggests that 

the voluntary approach, which assumes a higher penetration of 

new tech, actually reduces greenhouse gas emissions more than 

does a mandatory approach, and it has the further benefit of increasing GDP and reducing electricity prices. So, clearly there’s a 

lot of scope here in the U.S. for reducing greenhouse gas emissions, 

particularly as we incentivize new technology. 

How to incentivize it? One positive thing that we might do is reduce the cost of capital for new investment. The U.S. has a tax 

code that has much slower capital-cost recovery than most other 

countries. For example, combined heat and power, a U.S. investor 

gets only 29 cents back after 5 years; whereas, a Brazilian investor 

gets 50 cents back, and a Chinese investor gets a dollar back. So, 

their capital costs are lower, because they have much more rapid 

depreciation. 

So, looking at incentivizing investment here in the U.S. through 

those type of positive measures, as well as encouraging the type of 

activities that Chairman Connaughton discussed and Dave Montgomery will also discuss, I think, are the positive way to reduce 

greenhouse gases without harming U.S. economic growth. 

Thank you, Mr. Chairman. 

[The prepared statement of Dr. Thorning follows:] 

PREPARED STATEMENT OF DR. MARGO THORNING, MANAGING DIRECTOR, INTERNATIONAL COUNCIL FOR CAPITAL FORMATION

Introduction 

Mr. Chairman and Members of the Subcommittee, I appreciate the opportunity 

to submit this statement for the record. The International Council for Capital Formation is a Brussels-based think tank whose goal is to promote market-based solutions cost-benefit analysis to address economic and environmental issues. The ICCF 

is an affiliate of the Washington-based American Council for Capital Formation. We 

appreciate the opportunity to comment on the goals of the Asia-Pacific Partnership 

on Clean Development and Climate and positive impact that voluntary programs (in 

contrast to mandatory programs) can have in reducing greenhouse gas emissions. 

Pros and Cons of Mandatory Approaches to GHG Reduction 

Although there are numerous supporters of mandatory U.S. programs to reduce 

GHGs in the U.S. it is useful to examine the record of our allies in the EU in reaching their Kyoto Protocol targets before making such a committment: 

• Emission Trading in the EU: As U.K. Prime Minister Tony Blair noted in a 

speech last week, ‘‘I think first of all I should say that Britain is one of the very 

few countries in the world that will meet its Kyoto targets.’’ The main reasons 

for the U.K. being one of the few countries able to meet its Kyoto target are: 

(1) that it switched from coal to natural gas power for electricity generation, 

and (2) DuPont closed a facility that emitted large quantities of GHGs. Other 

EU countries are not so fortunate and incur significant costs if they try to meet 

their Kyoto targets. The ETS requires approximately 12,000 large industrial 

emitters and utilities to reduce CO2 emissions (or purchase the right to emit 

CO2) in accordance with their country’s Kyoto Protocol targets. 

The approach to emissions reductions embodied in the EU’s sectoral approach 

has failed to make much of a dent in EU emission growth, but has the potential 

to make a significant impact on the economies of countries trying to meet their 

targets. As noted in a recent report by the U.K.’s EEF, an association of engiVerDate Nov 24 2008 13:18 Jan 14, 2011 Jkt 63518 PO 00000 Frm 000032 Fmt 06633 Sfmt 06621 S:\GPO\DOCS\63518.TXT SCOM1 PsN: JACKIE
29 

neers and manufacturers, part of the 34 percent increase in U.K. electricity 

prices in 2005 was due to the ETS. The price of the right to emit a ton of carbon 

reached unexpectedly high levels in 2005, reaching $36 per ton of CO2 ($120 

per ton of carbon). Similarly, German climatologist Dr. Gerd Weber states that 

the ETS has placed additional costs through higher electricity prices on a number of energy intensive companies located in Germany, making production in 

the EU uncompetitive versus production from outside the EU. Several companies have announced that they will shift production to non-Kyoto countries, taking with them thousands of jobs. Norsk Hydro Aluminum, a Fortune 500 energy 

and aluminum supplier, closed several production sites in northern Germany 

because of higher costs related to emissions trading/electricity prices, Dr. Weber 

notes. The latest data from the European Environmental Agency shows that the 

‘‘EU 15’’ is expected to be 4 percent above their emissions target in 2010, instead of 8 percent below 1990 levels as required under the Kyoto Protocol (see 

Figure 1). There now appears to be a rift within Europe on climate change policy as Italy and some German industrialists express growing concerns with the 

impact of the ETS on electricity prices, production costs and competitiveness. 

The EU’s slow economic growth rate (about 1 percent annually) and high unemployment (about 10 percent) will only be exacerbated by their ETS. 

It seems very unlikely that EU governments will actually enforce their Kyoto 

targets because the cost, in terms of reduced GDP and employment, would be 

political suicide. If the EU actually wanted to reduce its emissions to the Kyoto 

Protocol target, it would have to use an economy-wide approach and cover all 

sectors, including transportation and households. Recent macroeconomic analyses of Germany, Spain, U.K., and Italy by the International Council for Capital 

Formation show that an economy-wide ETS designed to meet the Kyoto targets 

would reduce these countries’ GDP levels and employment significantly in 2010 

(see http://www.iccfglobal.org/pdf/Country-reports-overview.pdf). 

Reducing GHGs: Alternative Approaches 

• Mandatory ‘‘Upstream’’ and ‘‘downstream’’ regulatory approaches: Trying to reduce U.S. emissions through a cap and trade system applied at either ‘‘upstream’’ or ‘‘downstream’’ is likely to have serious consequences for the U.S. 

economy, including reduced GDP and increased unemployment rates. For example, various economic models show that the imposition of the Kyoto Protocol 

would reduce U.S. GDP levels by 1 to 4.2 percent annually by 2010 (see Figure 

2 at http://www.accf.org/pdf/oregontestimonyfinal.pdf). Less stringent emission reduction targets such as those in the McCain, Lieberman, and Bingaman 

proposals also have negative consequences for the U.S. economy (See Table 1). 

While the upstream approach is perhaps easier to monitor and enforce because 

far fewer emitters would be in the system, it suffers from the fact that final 

consumers won’t see much of a direct impact of the energy tax (or permit price) 

on their energy and fuel bills because those also include the cost of delivering 

the energy to consumers. On the other hand, if a business owner (say a paint 

manufacturer) who owns equipment that emits CO2 has to submit an emission 

allowance for each ton emitted, he will be able to make a careful cost-benefit 

analysis of when it makes economic sense to replace his capital equipment or 

make other production related decisions. An obvious question is, if a ‘‘downstream’’ system for reducing CO2 emissions is impractical because of the millions of small emitting sources, and an ‘‘upstream’’ system results in only attenuated decisionmaking on emissions, how efficient would a cap and trade system be in providing emission decisionmakers with a realistic incentive to efficiently and significantly reduce emissions? 

• Mandatory Caps on Emissions will not Drive Innovation: First, caps on emissions are not likely to promote new technology development because caps will 

force industry to divert resources to near-term, ‘‘end-of-pipe’’ solutions rather 

than promote spending for long-term technology innovations that will enable us 

to reduce GHGs and increase energy efficiency. An ETS will send exactly the 

wrong signals to investors because it will create uncertainty about the return 

on new investment. A mandatory cap would be seen by U.S. investors as just 

the ‘‘first step’’ in a likely series of more stringent targets as policymakers strive 

to reduce developed country to trajectories suggested by IPCC scenarios. Investors know that a ‘‘safety-valve’’ price of carbon (designed to create a sense of 

confidence about future energy costs) can easily be changed. Such uncertainty 

means that the hurdle rate, which new investments must meet, will be higher 

(thus less investment will occur) and they will be less willing to invest in the 

U.S. In addition, investors realize that if a mandatory emission reduction proVerDate Nov 24 2008 13:18 Jan 14, 2011 Jkt 63518 PO 00000 Frm 000033 Fmt 06633 Sfmt 06621 S:\GPO\DOCS\63518.TXT SCOM1 PsN: JACKIE
30 

gram were established in the U.S., they would be disadvantaged vis-a`-vis European companies because the relationship between regulators and business in 

the EU tends to be more flexible and accommodating than in the U.S. Now is 

the time to provide incentives for companies to voluntarily undertake additional 

carbon dioxide intensity reducing investments, not promote a system that raises 

the risk of any investment in our economy. 

Second, caps on U.S. emission growth are unlikely to succeed unless all the relevant markets exist (in both developed and developing countries) and operate 

effectively. All the important actions by the private sector have to be motivated 

by price expectations far in the future. Creating that motivation requires that 

emission trading establish not only current but future prices, and create a confident expectation that those prices will be high enough to justify the current 

R&D and investment expenditures required to make a difference. This requires 

that clear, enforceable property rights in emissions be defined far into the future so that emission rates for 2030, for example, can be traded today in confidence that they will be valid and enforceable on that future date. The international framework for climate policy that has been created under the UNFCCC 

and the Kyoto Protocol cannot create that confidence for investors because sovereign nations have different needs and values. Therefore, it seems likely that 

the ETS system which the EU has implemented will fail to spread to other 

parts of the world and will eventually be replaced with a more practical approach to climate change policy. 

Third, a fixed cap on emissions inevitably collides with U.S. population growth. 

The EU–15 countries are having difficulty meeting their Kyoto targets and they 

have negligible population growth. In sharp contrast, U.S. population is projected to grow more than 20 percent over 2002–2025 according to the EIA. More 

people means more mouths to feed, more houses to warm, more factories to 

run—all of which require more energy and at least some additional GHG emissions. 

Voluntary Approaches to Emission Reduction 

• The Role of Economic Growth and Technology in GHG Reduction: Many proponents of the cap and trade system fail to realize that economic growth can 

have a positive impact on GHG emission reductions. For example, the U.S., 

with its voluntary approach to emission reductions, has cut its energy intensity 

by 12.2 percent over the 1997–2003 period compared to only 7.6 percent in the 

EU with its mandatory approach(see Figure 2). Technology development and deployment offers the most efficient and effective way to reduce GHG emissions 

and a strong economy tends to pull through capital investment faster. Given the 

extremely long lives of much of the capital stock, the voluntary approach will 

allow emissions intensity to be reduced in a cost effective way (see Figure 3). 

There are only two ways to reduce CO2 emissions from fossil fuel use—use less 

fossil fuel or develop technologies to use energy more efficiently, to capture 

emissions or to substitute for fossil energy. There is an abundance of economic 

literature demonstrating the relationship between energy use and economic 

growth, as well as the negative impacts of curtailing energy use. Long-term, 

new technologies offer the most promise for affecting GHG emission rates and 

atmospheric concentration levels. In fact, a new analysis by DOE/EIA (AEO 

2006) shows that their High Tech scenario reduces emissions more than does 

a mandatory reduction in GHG intensity (see Table 2) and has a positive impact 

on GDP levels and reduces electricity prices. 

• Tax Reform Could Reduce Growth of U.S. GHG Emissions: Stimulating the development of various high technology programs can be accelerated through government programs as well as by encouraging private sector investment. Improving the tax treatment of new investment through faster depreciation, investment tax credits, making permanent the 15 percent tax rate on dividends and 

capital gains received by individuals are positive steps that reduce the cost of 

capital for investment. ACCF research shows that U.S. companies receive only 

29 cents after 5 years through depreciation allowances on each dollar of investment in a combined heat and power facility while a company in China gets 

$1.04 back and a Brazilian company gets 50 cents. Thus, slow capital cost recovery in the U.S. Federal tax code places domestic companies at a disadvantage 

compared to our trading partners and slows the development and installation 

of new energy efficient technology. 

31 

Conclusion 

Energy use and economic growth go hand-in-hand, so helping the developing 

world improve access to cleaner, more abundant energy should be our focus. Nearterm GHG emission reductions in the developed countries should not take priority 

over maintaining the strong economic growth necessary to keeping the U.S. one of 

the key engines for global economic growth. Establishing a mandatory cap and trade 

system in the U.S. would impede, not promote, U.S. progress in reducing emissions 

intensity. U.S. climate change policies should continue to strive to reduce energy intensity as the capital stock is replaced over the business cycle and to develop new, 

cost-effective technologies for alternative energy production and conservation and 

encourage the spread of economic freedom in the developing world. This approach 

is likely to be much more productive than having the U.S. adopt an ETS and thereby sacrifice economic well-being and job growth with little or no long-term impact 

on global GHG emissions. 

Several provisions of the 2005 Energy Bill should have a positive impact on climate change. The new Asia-Pacific Partnership for Clean Development and Climate 

can also play a key role in transferring new technology to developing countries and 

help provide the practical assistance that is needed for a global approach to emission reduction. 

Table 1. Economic Impact of McCain/Lieberman 

and the Bingaman Proposal on the United States 

2010 2020 

McCain/Lieberman Bingaman McCain/Lieberman Bingaman 

GDP Falls ¥1.0 ¥0.2 ¥1.9 ¥0.4 

Job Losses ¥840,000 ¥230,000 ¥1,306,000 ¥326,000 

Household Consumption Falls ¥$725 ¥$147 ¥$800 ¥$164 

*State and Federal Tax Receipts Decline. 

*Low Income and Elderly Bear Large Burden Due to Higher Energy Costs. 

Table 2: Comparison of EIA High Tech Scenario 

with ‘‘Salazar Request’’ Cap and Trade Scenarios 

2010 2020 2030 

CO2 Emissions From Energy (Million Mt CO2) 

AEO2006 Reference Case 6,364 7,119 8,114 

AEO2006 Integrated High Technology 6,253 6,734 7,421 

EIA/Salazar Cap-Trade 2 NA 6,843 7,333 

Change From Reference Case 

AEO2006 Integrated High Technology (111) (385) (693) 

EIA/Salazar Cap-Trade 2 (276) (781) 

Real GDP (Billion 2000 Dollars) 

AEO2006 Reference Case 13,043 17,541 23,112 

AEO2006 Integrated High Technology 13,056 17,580 23,152 

EIA/Salazar Cap-Trade 2 NA 17,522 23,077 

Change From Reference Case 

AEO2006 Integrated High Technology 13 39 40 

EIA/Salazar Cap-Trade 2 (19) (35) 

% Change from Reference Case 

AEO2006 Integrated High Technology 0.1 0.2 0.2 

EIA/Salazar Cap-Trade 2 ¥0.1 ¥0.2 

Electricity Prices (Average all users—cents per kwh) 

AEO2006 Reference Case 7.3 7.25 7.51 

AEO2006 Integrated High Technology 7.2 7.03 7.33 

EIA/Salazar Cap-Trade 2 NA 7.89 8.48 

Change From Reference Case 

AEO2006 Integrated High Technology (0.1) (0.2) (0.2) 

EIA/Salazar Cap-Trade 2 0.6 1.0 

% Change from Reference Case 

AEO2006 Integrated High Technology ¥1.4 ¥3.0 ¥2.4 

EIA/Salazar Cap-Trade 2 8.8 12.9 

32 


thorn1.eps thorn2.eps
33 

Senator VITTER. Thank you very much, Dr. Thorning. 

Dr. Montgomery? 

STATEMENT OF W. DAVID MONTGOMERY, PH.D., 

VICE PRESIDENT, CRA INTERNATIONAL 

Dr. MONTGOMERY. Thank you, Mr. Chairman. 

My name is David Montgomery, and I’m Vice President of CRA 

International, formerly known as Charles River Associates. I’ll give 

a brief summary. 

The Asia-Pacific Partnership addresses one of the most difficult 

problems with climate policy, which is how to reduce the growth of 

greenhouse gas emissions from developing countries while sustaining or improving their prospects for economic growth. I believe 

those are the only terms on which developing countries are willing 

to enter into discussions of climate change. 

Extension of emissions caps and international permit trading to 

developing countries cannot solve this problem, but the Asia-Pacific 

Partnership can. There are large opportunities for cost-effective 

emission reductions in China and India. These opportunities exist 

because of a significant technology gap between China and India, 

on the one hand, and the United States and other members of the 

partnership, on the other. 

China now produces about four times as much greenhouse gas 

emissions per dollar of output as the United States; and India, 

about twice as much. China’s carbon intensity has been improving 

over time. But, even taking this into account, I conclude that the 

carbon intensity of new investment in China is about twice what 

it is in the United States. India has not shown much improvement 

for a long time; and so, its carbon intensity of new investment is 

also about twice that of the U.S. 


thorn3.eps
34 

This is the technology gap. If China and India could be moved 

to the level of technology normally in use in the United States in 

the new capital equipment that they’re building, that change could 

reduce global emissions over the next decade by an amount comparable to what the Kyoto Protocol could have accomplished even 

if it all its signatories, including the United States, had adhered to 

the caps that were proposed there. 

And I have placed both some of this analysis and references to 

the research behind it in my prepared statement, which I’d like to 

have submitted for the record. 

This technology gap is largely explained by institutional factors 

in China and India that lead to wasteful use of energy and discourage foreign direct investment that would transfer technologies used 

globally to China and India. This can be seen readily in Figure 2 

of my prepared testimony, which shows that energy intensity is 

closely related to scores on an Index of Economic Freedom, which 

introduces measures of progress in different—in institutional reform in different countries throughout the world. 

Countries that have created the institutional framework required 

for markets to function efficiently have relatively low energy intensity, relatively low carbon emissions per dollar of output. That includes the United States and also the Asian Tigers, which can be 

examples to China and India of how institutional reform produces 

both economic growth and lower emissions. Countries that have not 

developed these institutions, including China and India, have much 

higher energy intensity. 

Now, what I do I mean by and ‘‘institutional framework,’’ since 

this is what I believe the Asia-Pacific Partnership needs to address 

as a major focus? India surveys of the business climate identified 

deficiencies in excessive bureaucracy and corruption, deficiencies in 

the administration of justice, large subsidies that encourage wasteful energy use, and the collapse of the electricity infrastructure. In 

China, the list is similar, starting with lack of protection for intellectual property, an underdeveloped system of property and contract law—again, bureaucracy and corruption, and a dominant role 

for state-owned enterprises. 

The partnership starts with a tremendous advantage when it addresses institutional reforms of this kind that would facilitate technology transfer and reduce greenhouse gas emissions, because addressing these institutional factors is critical to economic growth in 

China and India, as well. Both countries have begun on the process 

of institutional reform, and the institutional reforms that have 

taken place thus far are responsible for the growth that they have 

seen, but they are going to need a great deal more reform in order 

to sustain their economic growth. 

It’s not necessary for the Asia-Pacific Partnership to take on 

every aspect of this immense challenge of creating preconditions for 

growth in China and India. It can focus on those reforms that 

would have the most leverage on energy markets and technology 

transfer. I think this focus on institutional reform is built into the 

charter of the Partnership. It’s critical that it become the partnership’s highest priority. 

Without institutional reform, no demonstration project or effort 

to transfer technology is going to have a chance of leading to broad 

35 

technology transfer and diffusion, because the hostile economic environment in China and India that now prevents even technologies 

that are in common use in the United States from being adopted. 

With institutional reform, market forces can be expected to lead to 

rapidly improving emissions intensity without imposition of emission caps or other costly programs on China and India. This is the 

challenge and the opportunity for the Asia-Pacific Partnership. 

Thank you, Mr. Chairman. 

[The prepared statement of Dr. Montgomery follows:] 

PREPARED STATEMENT OF W. DAVID MONTGOMERY, PH.D., VICE PRESIDENT, 

CRA INTERNATIONAL

Mr. Chairman and Members of the Subcommittee: 

Thank you for your invitation to testify in today’s hearing. I am David Montgomery, and I am Vice President of CRA International, where I am co-leader of its 

global Energy and Environment Practice. This testimony is a statement of my own 

research and opinions, and does not represent a position of CRA International. 

I am particularly pleased by this opportunity to testify on ‘‘The Role of Science 

in the Asia-Pacific Partnership.’’ I believe, based on studies that I and others have 

conducted over the past few years, that the Asia-Pacific Partnership offers an opportunity to define an approach to climate change policy that can reconcile the objectives of economic growth and environmental improvement for developing countries. 

This testimony is organized in three parts. The first section discusses the opportunities that exist for cost-effective emission reductions in developing countries, and 

the role of technology transfer and foreign direct investment in taking up these opportunities. The second part of my testimony provides the reasons why these opportunities exist and discusses why it is critically important that policy be designed, 

as the Asia-Pacific Partnership is, to attack the root causes of both poverty and high 

CO2 emissions in developing countries. Those root causes are to be found in economic institutions that prevent sustained economic growth and cause wasteful energy use. Fundamental reform of economic institutions is required before any attempts to reduce the greenhouse gas intensity of developing economies can succeed, 

and that reform can be expected on its own to stimulate greater foreign investment 

and technology transfer. The final section of my testimony discusses how the AsiaPacific Partnership can realize these key opportunities and suggestions on possible 

ways in which the Partnership could be made more effective. 

My overall conclusion is that the Asia-Pacific Partnership presents an opportunity 

to define a significant new international approach to climate policy, one that does 

not require emission caps or trading to achieve reductions in global emissions. Although other countries are not willing to admit the failure of the Kyoto Protocol 

publicly, there are very promising signs of interest in the ideas embodied in the 

Asia-Pacific Partnership: the use of technology, the role of developing countries, and 

discussions among ‘‘large emitters.’’ I therefore believe that this is a time when the 

United States can be engaged in international cooperation that moves away from 

the cap and trade approach embodied in the Kyoto Protocol toward a more technology and growth oriented approach to the climate problem. The Asia-Pacific Partnership provides the foundation for that approach. 

I. Opportunity 

I will make three points in regard to the opportunities that exist in developing 

countries. 

1. Globally, the best opportunities for near-term, cost-effective reductions in 

greenhouse gas emissions are in China, India, and other developing countries. 

2. Developing countries are only interested in approaches to reducing their 

greenhouse gas emissions that will enhance opportunities for economic growth. 

3. Policies that stimulate greater technology transfer and investment in developing countries have the potential to achieve both economic growth and climate 

policy goals. 

36 

1 Y. Kaya, ‘‘Impact of Carbon Dioxide Emission Control on GNP Growth: Interpretation of Proposed Scenarios.’’ Paper presented to the IPCC Energy and Industry Subgroup, Response Strategies Working Group, Paris, 1990. 

Greenhouse gas emissions are driven by population, income and technology. This 

fundamental relationship is described in an equation known as the ‘‘Kaya Identity.’’ 1 It states that 

The first two terms of this equation show that growth in total income comes from 

population growth and growth in per capita income. Technology appears in this 

equation in the third term, which describes CO2 per dollar of income. The legitimate 

aspiration of poor countries is to keep per capita income increasing. Population is 

a separate and divisive issue—and in any event is not likely to be responsive to policies in the short-run. Since per capita income growth and population growth are off 

the table, this leaves technology—CO2/($)—as the feasible object for change. 

Technology is critically important because emissions per dollar of income are far 

larger in developing countries than in the United States or other industrial countries. This is both a challenge and an opportunity. It is a challenge because it is 

the high emissions intensity—and relatively slow or non-existent improvement in 

emissions intensity—that is behind the high rate of growth in developing country 

emissions. 

Opportunities exist because the technology of energy use in developing countries 

embodies far higher emissions per dollar of output than does technology used in the 

United States; this is true of new investment in countries like China and India as 

well as their installed base (See Figure 1). The technology embodied in the installed 

base of capital equipment in China produces emissions at about 4 times the rate 

of technology in use in the United States. China’s emissions intensity is improving 

rapidly, but even so its new investment embodies technology with twice the emissions intensity of new investment in the United States. India is making almost no 

improvement in its emissions intensity, with the installed base and new investment 

having very similar emissions intensity. India’s new investment also embodies technology with twice the emissions intensity of new investment in the United States. 

The United States is a good benchmark of technology that is economic at today’s 

energy prices, without any additional incentives or regulations that would lead to 

adoption of more costly technologies for the purpose of reducing greenhouse gas 

emissions. Japan’s emissions intensity is about half that of the United States, so 

that Japanese technology provides a benchmark for more aggressive efforts to reduce energy use. 


mont1.eps mont2.eps
37 

2The World Summit on Sustainable Development (WSSD) reaffirms the need to have balanced 

economic development, social development and environmental protection. It also reaffirms poverty eradication and preservation of the environment as the overarching objectives of sustainable development (United Nations 2002). 

Priorities for Economic Growth 

Developing countries have made it clear that their highest priorities are dealing 

with poverty, disease, famine, unemployment and violent conflict,2 and that sustained economic growth is a prerequisite for dealing with these problems. Therefore, 

developing countries have also made it clear that they will not accept caps on their 

greenhouse emissions and have no interest in becoming part of a global emission 

trading system—at least on terms acceptable to the industrial countries. They see 

these approaches to climate change policy as threatening their ability to grow and 

deal with their more pressing problems. Therefore, only approaches to climate policy 

that combine greater economic growth with reductions in emissions intensity have 

any chance of attracting the interest of developing countries. 

The Importance of Technology Transfer 

Technologies that offer lower CO2 intensity have largely been developed in the industrial countries. Therefore technology transfer, which occurs largely through foreign direct investment, is required to replace carbon-intensive technology. 

Technology transfer and increased investment have the potential for achieving 

large reductions in emissions. The potential from bringing the emissions intensity 

of developing countries up to that currently associated with new investment in the 

United States is comparable to what could be achieved by the Kyoto Protocol (See 

Table 1). These are near term opportunities, from changing the nature of current 

investment and accelerating replacement of the existing capital stock. Moreover, if 

achieved through transfer of economic technologies it is very likely that these emission reductions will be accompanied by economic benefits for the countries involved. 

Table 1: Greenhouse Gas Emission Reductions Achievable Through Technology Transfer 

and Increased Investment 

To 2012 

(MMTCE) 

To 2017 

(MMTCE) 

Adopt U.S. technology for new investment in China and India 2,600 5,200 

Adopt U.S. technology with accelerated replacement in China and 

India 4,200 7,700 

Adopt continuously improving technology with accelerated replacement in China and India 5,000 9,800 

EU under Kyoto Protocol (without hot air) 600 1,400 

All Annex B countries under Kyoto Protocol (including U.S. and hot 

air) 2,800 7,300 

The potential emission reductions estimated in Table 1 are derived from a study 

my colleagues and I performed using a model of economic growth based on the idea 

of ‘‘embodied technical progress.’’ In the first case, we assumed that in 2005 new 

investment in China and India immediately moves to the level of technology observed in the United States, and calculate the resulting reduction in cumulative carbon emissions through 2012 and 2017. This is the technology transfer case. In the 

second case, we assume that policies to stimulate foreign direct investment accelerate the replacement of the oldest capital with new equipment, giving even larger 

savings. In the third case, we assume that the new technology continues to improve 

over time, as it will if policies to stimulate R&D into less emissions-intensive technologies are also put in place. It can be seen that even the least aggressive of these 

policies has potential for emissions reductions as large as possible if all countries 

(including the U.S.) achieved exactly the emission reductions required to meet their 

Kyoto Protocol targets. This is because the technology gap is so large, and because 

of the large share of global emissions that will come from China and India in the 

next few decades. 

It is also important to note that given the large difference between emission intensities of China and India and the U.S., and the relatively small remaining distance 

between the U.S. and Japan, most of the emission reductions achievable through 

technology transfer can be achieved be moving from current to U.S. technology. 

Going beyond this in the next decade or so, by pushing developing countries to adopt 

38 

3The potential for emissions reduction through technology transfer is discussed in P. Bernstein, W. David Montgomery and S.D. Tuladhar, ‘‘Potential for Reducing Carbon Emissions from 

Non-Annex B Countries through Changes in Technology.’’ Accepted for publication, Energy Economics. 2006. 4This section is based on W. David Montgomery and Roger Bate. ‘‘Beyond Kyoto: Real Solutions to Greenhouse Emissions from Developing Countries.’’ AEI Environmental Policy Outlook, 

July 1, 2004. 5 Economic Freedom of the World (EFW) index is published by The Frasier Institute 

(http://www.freetheworld.com/release.html) and measures the degree to which a country is supportive of economic freedom. The EFW summary index is constructed from five different policy 

areas: (i) size of government; (ii) legal structure and protection of property rights; (iii) access 

to sound money; (iv) international exchange; and (v) regulation. Index of Economic Freedom is 

published by the Heritage Foundation/Wall Street Journal (http://www.heritage.org/research/ 

features/index/) and reports 10 broad measures of economic freedom for 161 countries. 

technology not currently economic even in the United States, entails rapidly increasing costs and smaller emission reductions. 3

The difference in technology that accounts for the difference in emissions intensity 

between developing countries and the U.S. will not be eliminated without substantially greater technology transfer. That technology transfer occurs largely through 

the mechanism of foreign direct investment, as multinational companies bring with 

them the technology they have developed and use in their current markets. The 

combination of technology transfer and FDI is one of the strongest engines of 

growth. But increasing technology transfer and FDI to China and India requires removing current defects in their investment climate. 

II. Causes of High Carbon Intensity and Effective Remedies 4

In a highly developed economy such as that of the United States, characterized 

by efficient markets, pricing relatively undistorted by government policies or government-owned enterprises, free trade and free flows of capital, and strong legal institutions and protection of property rights, it is likely that there are few opportunities 

to improve carbon intensity without causing reductions in economic performance 

and income per capita. If technologies offering such opportunities exist, market 

forces and individual economic interest will lead to their adoption. This is not the 

case in many developing countries, which have economic systems characterized by 

a lack of incentives for efficient energy use, due to institutional and market failures, 

and an investment climate that discourages foreign investment and technology 

transfer. Remedying these institutional and market failures offers the prospect of 

reconciling economic growth and emissions reduction. 

Economic Freedom and Emissions Intensity 

The modern literature on economic development emphasizes the role of legal, market and governmental institutions in economic development. The concept of ‘‘economic freedom’’ summarizes a wide variety of conditions that are found to be conducive to individual initiative and economic growth.5 Indices of economic freedom are 

based on comprehensive surveys of conditions around the world. The broad indices 

of economic freedom include specific institutional problems that can lead to high carbon intensity: 

• Pricing systems that make efficient technologies unprofitable. 

• Institutions and policies that make markets inhospitable to foreign investment 

with world class technology. 

—Rule of law and protection of intellectual property. 

—Role of state owned enterprises. 

—Access to foreign capital. 

• Lack of infrastructure, education and skills required for technology. 

39 

Lack of these components of economic freedom is clearly associated with high levels of energy use per dollar of GDP. Figure 2 plots scores on the Economic Freedom 

of the World Index compiled by the Frasier Institute against energy use per dollar 

of GDP, measured at market exchange rates. 

Energy intensity is used as a measure because it is directly connected to greenhouse gas emissions from energy use. For example, three of the countries with the 

relatively poor scores on economic freedom, Russia, China and India, have high energy use and carbon emissions per dollar of GDP. At the other end of the scale, 

countries like South Korea, Singapore and Namibia with relatively free economies 

have much lower carbon intensities, similar to that of the United States. 

The curved line represents the results of a statistical analysis of the association, 

which shows that about one-third of the variation in energy intensity is explained 

by differences in scores on economic freedom. This is an unusually clear relationship 

for this type of cross-sectional data. The literature on economic development also 

shows that the economic freedom index is very closely associated with per capita income and rates of economic growth. 

In more recent, unpublished work my colleagues and I have focused on specific 

aspects of the institutional setting that can be expected to have a direct effect on 

either the efficiency of energy use or the transfer of economic technologies. This research reveals that both China and India have significant institutional shortcomings 

in such areas as the rule of law and administration of justice, protection of intellectual property, excessive bureaucracy and corruption, a dominant role of state enterprises in the economy, and inadequate infrastructure. In both countries, continued 

economic reform is recognized as being necessary to sustain current rates of economic growth. We have also found that the same institutional problems are directly 

connected to wasteful energy use, by diminishing or eliminating incentives for efficient use of resources, and discourage foreign direct investment of the type that 

leads to effective technology transfer. 

Design of Policies that Can Be Effective and Engage Developing Countries 

The evidence that high emissions intensity is closely associated with fundamental 

market and institutional failures leads me to conclude that the highest priority of 

the Asia-Pacific Partnership should be to facilitate the process of removing market 

and institutional failures in China and India. 

Without remedies for the fundamental institutional problems that underlie poor 

scores for economic freedom, the continuation of two unfortunate current conditions 

can be expected: 


mont3.eps
40 

• A hostile economic environment in China and India will prevent technology that 

is introduced through projects that the Partnership might support from spreading throughout the economy. 

• Emission caps will remain costly, because without new technology, emission reductions will require diverting resources that could otherwise be used for 

growth. 

If remedies are found for fundamental institutional problems, two kinds of results 

can be expected: 

• Projects that transfer economic technologies will take place without further incentives and will lead to spillover effects and significant emission reductions. 

• The root causes of both poverty and high carbon intensity will be addressed together. 

The actions required to create fundamental institutional reform must take place 

within the developing countries themselves, and be designed and carried out by 

their governments, businesses and citizens. The Asia-Pacific Partnership includes 

China and India, the two developing countries with the largest current and potential future emissions; Korea, an Asian country whose success proves that economic 

freedom leads to growth and lower greenhouse gas emissions; and three countries 

that can be the source of direct investment and technology transfer—Australia, 

Japan and the United States. The great opportunity afforded by the Asia-Pacific 

Partnership is to create a process in which all these countries can work together 

to identify the needs for institutional reform in China and India, understand the 

benefits that institutional reform would provide in enhancing economic growth and 

reducing greenhouse gas emissions, and take on appropriate responsibilities for 

bringing about those changes. But to do this, the Asia-Pacific Partnership must 

make institutional reform, not identification of specific projects to be funded by 

donor governments, its highest priority. 

III. How the Asia-Pacific Partnership Can Support Institutional Reform 

The Partnership starts with a tremendous advantage when it addresses institutional reforms that will facilitate technology transfer and reduced greenhouse gas 

emissions, because addressing institutional issues is critical to the highest priority 

of both China and India. Moreover, both countries have already begun the process 

of institutional reform, and recognize that their current rates of economic growth 

were made possible by those reforms. 

In the first part of this testimony I have attempted to establish that institutional 

reform should be the highest priority of the Asia-Pacific Partnership. This conclusion is supported first by evidence of a large gap in energy technology between 

China and India, on one hand, and the rest of the Partnership. This evidence comes 

from data on national and, to a limited extent, sectoral energy intensities which 

support inferences about the level of technology embodied in new investment. I also 

drew on research on institutional obstacles to economic growth to discuss areas in 

which China and India lack a market-oriented investment climate and other institutions that support efficient markets, and described how these deficiencies are likely 

to be causes of the technology gap. 

This analysis provides strong indications that China and India lag far behind the 

U.S., Japan and Australia in technology, even in new investment, and that this lag 

and resulting high levels of greenhouse gas emissions are attributable to failings in 

legal, political and market institutions. There is also strong evidence that remedies 

for these failings would contribute to economic growth. However, much more detailed understanding of the opportunities for institutional reform and improved 

technology is required as a basis for an action plan, and a consensus on such an 

understanding is required to reach agreement on actual steps to be taken by members of the Partnership. 

I believe that this consensus and agreement could be reached if the Partnership 

undertook four steps, that I arrange into two distinct phases. 

The first phase would be a research and consensus building process, to provide 

a shared understanding of technological possibilities and institutional barriers. The 

first step in the research and consensus phase should be to identify and characterize 

the investment climate of China and India and the potential for emission reductions 

through transfer of technologies that would be economic but for institutional failures. This process would take place in working groups with participation limited to 

disinterested experts, representatives of the business communities and the APP governments. Achieving consensus across stakeholders and countries on the basic facts 

about the current investment climate and the role of FDI in promoting technology 

transfer will go a long way toward developing support for reforms. 

41 

6M.I. Hoffert et al., ‘‘Advanced Technology Paths to Global Climate Stability: Energy for a 

Greenhouse Planet’’ Science, Vol. 298, Nov. 1, 2002, p. 981–7. 

It is critical that businesses who have had direct experience in applying state-ofthe-art technology and dealing with the institutional setting in China and India tell 

their stories as part of this process. The key to success is not an outstanding set 

of studies by the experts, but identification of real-world opportunities and barriers. 

Private sector knowledge of technologies that can make it on their own in the global 

marketplace and experience with institutional obstacles to doing profitable business 

in China and India is the essential foundation of this approach. 

The second step would be for the same working groups to develop proposals, given 

the benchmarking exercise of the first step, that would accomplish significant 

changes. These proposals should describe specific institutional reforms that would 

have direct benefits for technology transfer and efficient use of energy. Proposals 

should include actions by all parties, so that they are broadly perceived as equitable 

and cooperative. In this step in particular, opinions of international businesses on 

how much change is needed to create a receptive investment climate should be 

taken as a major input. 

The third step would move from working groups to interaction among the APP 

governments to understand the difficulties associated with removal of obstacles for 

technology transfer in particular and institutional reform in general, and what each 

government could contribute. The current institutional climate in China and India 

exists for a reason, and how incremental reform can proceed in the face of interests 

that benefit from the status quo must be addressed directly. The interaction should 

identify actions that China and India would be willing to see Australia, Japan and 

the United States undertake to encourage, speed and reward the process of institutional reform, as well as feasible actions to be undertaken in China and India by 

their respective governments. 

The final phase should be to create an ongoing process in which Partnership governments would agree to concrete actions that each would take to support institutional reforms and achieve the identified benefits for climate and economic growth. 

This should be designed as a pledge and review process, in which each government 

agrees to undertake actions desired by the others and periodically to review whether 

commitments were carried out. Such agreements tend to be self-enforcing, because 

any country that fails to abide by a commitment faces the credible consequence of 

losing future benefits. 

Finally, I would suggest that the hardest thing in thinking about policies addressing global poverty, oppression and environmental progress is to avoid making the 

best the enemy of the good. Technology is a critical issue because there is no economic possibility of stabilizing greenhouse gas concentrations without R&D to create 

technology not available today. 6 In the long term, this technology is required to turn 

around developing country emissions, just as it is required to turn around emissions 

from the industrial world. In the long-run, new technology for developing countries 

is clearly critical. R&D to create this technology is therefore also critical, and the 

technology that is economically successful may be different in the global South than 

in the global North. 

But right now the huge opportunity is in replacing technology now being used in 

the global South with technology now being used in the global North. Therefore, it 

is extremely important to keep the focus of the Asia-Pacific Partnership on bringing 

about the critical market reforms that will lead to greater technology transfer and 

improvements in carbon intensity. Identification of deficiencies in institutions and 

economic freedom in each country should be a key first step, after which the members of the Partnership can address mutually supportive actions to remove those 

barriers and improve the flow of investment and technology into China and India. 

Senator VITTER. Thank you, Dr. Montgomery. 

And now, Mr. Doniger. 

STATEMENT OF DAVID D. DONIGER, POLICY DIRECTOR, 

CLIMATE CENTER, NATURAL RESOURCES DEFENSE COUNCIL 

Mr. DONIGER. Thank you, Senators, for the opportunity to testify 

today on this topic. 

I’m David Doniger. I’m Climate Policy Director at the Natural 

Resources Defense Council. I also served at the Environmental Protection Agency in the 1990s, where I helped direct Clinton AdminVerDate Nov 24 2008 13:18 Jan 14, 2011 Jkt 63518 PO 00000 Frm 000045 Fmt 06633 Sfmt 06601 S:\GPO\DOCS\63518.TXT SCOM1 PsN: JACKIE
42 

istration climate policies. I might add that I have no support from 

the Exxon Corporation. 

The Asia-Pacific Partnership is symptomatic of the current Administration’s failure to take meaningful action to curb global 

warming. The U.S. has limited the terms of engagement with other 

countries to strictly voluntary measures, backed by what can only 

be described as token funding. On these terms, the partnership 

cannot make a difference; it’s simply an exercise in looking busy. 

Now, time is running out. Most serious climate scientists now 

warn there’s a very short window of time to begin serious emission 

reductions to avoid truly dangerous global warming. The science 

debate is over. The National Academy of Sciences has concluded 

that the debate is over, significant emission reductions are needed, 

and delay only makes the job harder. The evidence continues to 

pile up that we’re already suffering dangerous climate impacts: 

stronger hurricanes, melting ice caps, killer heat waves, and severe 

droughts. 

Scientists have recently detected accelerated melting of the 

Greenland and West Antarctic ice sheets much faster than anyone 

expected. If either of these ice sheets melts away, sea level rise will 

be more than 20 feet, with utterly disastrous implications for Louisiana, Florida, New Jersey, and low-lying regions all around the 

world. There’s only a short window of time to stop this from happening. 

We have a reasonable chance to avoid this if we can keep atmospheric concentrations from rising above 450 parts per million. And 

we can do this only if we stop U.S. emissions growth within the 

next 10 years, and cut emissions by at least half over the next 50 

years. If the U.S. acts on this scale, together with similar cuts by 

developed countries and limiting emissions growth from developing 

countries, we could keep the world from exceeding that 450-partper-million level. 

So, here is our choice, as indicated in this chart. If we start acting soon, and work with other countries for comparable actions, we 

can do this with a realistic, achievable annual rate of emission reduction, the green line, something on the order of 2.8 percent reduction per year. But if we delay the start of these reductions for 

another 10 years, the job becomes much harder, and the rate of reduction that would have to be achieved doubles. It’s immensely 

more difficult if we wait. 

Voluntary measures won’t work. In 2002, the President recommitted the U.S. to stabilizing greenhouse concentrations at nondangerous levels. That’s the objective of the treaty his father entered into and that we ratified. He says his goal is to slow, stop, 

and reverse emissions growth, but the target that he has set, even 

if it was met, would still cause U.S. emissions to rise by 14 percent 

between 2002 and 2012. That’s exactly the same rate that grew in 

the prior 10 years. 

We need mandatory limits. The Senate voted for a mandatory 

market-based limit that would slow, stop, and reverse emissions 

growth last year. State and local governments are leading. Many 

other constituencies are coming on. More than 80 evangelical leaders called for mandatory limits earlier this year. And, just yesterday, appearing before the Senate Energy Committee, some of the 

43 

largest electric utility suppliers of generating equipment and electricity customers called for mandatory limits. What they said is, 

they’re making 50-year investments, and they need to know what 

the rules of the road are, because they can’t make sensible investments without knowing what the limits are going to be. Other 

countries get this, too. 

The problem with the Asia-Pacific Partnership is that the United 

States comes to the table with nothing more than a wish to talk 

about voluntary cooperation. The U.S.—it’s not a bad idea, in principle, to work with a smaller set of key countries. That’s what Tony 

Blair set out to do in a group called the ‘‘G8 plus 5,’’ with the G8 

and China, India, Mexico, Brazil, and South Africa. But the U.S. 

won’t play in this ballpark. Instead, we’re trying to construct our 

own ballpark, with our own rules, for a voluntary-only approach. 

And this isn’t going to lead to anything significant. 

The solution lies in embracing the market. But, as the companies 

testified yesterday to the Energy Committee, without mandatory 

limits on emissions, there is no market. So, without mandatory limits, the Asia-Pacific Partnership is just theater, theater that does 

not protect the American people from stronger hurricanes, heat 

waves, drought, coastal inundation. 

American business ‘‘gets it.’’ American leaders, at the State and 

local level, ‘‘get it.’’ A majority of the Senate ‘‘gets it.’’ And our partners and competitors abroad ‘‘get it.’’ It’s time for action at the national level. 

Thank you. 

[The prepared statement of Mr. Doniger follows:] 

PREPARED STATEMENT OF DAVID D. DONIGER, POLICY DIRECTOR, CLIMATE CENTER, NATURAL RESOURCES DEFENSE COUNCIL

Thank you for the opportunity to testify today on science and policy issues related 

to the Asia-Pacific Partnership. My name is David Doniger, and I am Climate Policy 

Director at the Natural Resources Defense Council (NRDC). NRDC is a national, 

nonprofit organization of scientists, lawyers and environmental specialists dedicated 

to protecting public health and the environment. Founded in 1970, NRDC has more 

than 1.2 million members and online activists nationwide, served from offices in 

New York, Washington, Los Angeles, and San Francisco. I have worked for NRDC 

in two separate stints for nearly 20 years. I also served in the Environmental Protection Agency in the 1990s, where I helped direct the Clinton Administration’s domestic and international policy on global warming. 

The Asia Pacific Partnership is symptomatic of the current Administration’s failure to take meaningful action to curb global warming either at home or abroad. The 

U.S. has limited the terms of engagement with the other participating countries to 

strictly voluntary measures and technology cooperation backed by what can only be 

described as token governmental funding. On these terms, the Partnership cannot 

make a difference. It is simply an exercise in looking busy while other nations engage in real efforts internationally and while business leaders, elected officials, and 

others work toward real policies here at home. 

Time Is Running Out 

Most serious climate scientists now warn that there is a very short window of 

time for beginning serious emission reductions if we are to avoid truly dangerous 

greenhouse gas concentrations without severe economic impact. The science debate 

is over. Significant emission reductions are needed, and delay only makes the job 

harder. As the National Academy of Sciences recently stated: 

Despite remaining unanswered questions, the scientific understanding of climate change is now sufficiently clear to justify taking steps to reduce the 

amount of greenhouse gases in the atmosphere. Because carbon dioxide and 

some other greenhouse gases can remain in the atmosphere for many decades, 

centuries, or longer, the climate change impacts from concentrations today will 

44 

1 National Academy of Sciences, Understanding and Responding to Climate Change: Highlights of National Academies Reports, p. 16 (October 2005), http://dels.nas.edu/dels/ 

rptlbriefs/climate-changefinal.pdf. 

likely continue well beyond the 21st century and could potentially accelerate. 

Failure to implement significant reductions in net greenhouse gases will make 

the job much harder in the future—both in terms of stabilizing their atmospheric abundances and in terms of experiencing more significant impacts. 1

The evidence continues to pile up that we are already suffering dangerous climate 

impacts due to the build-up of carbon dioxide that has already occurred: stronger 

hurricanes, melting ice caps, killer heat-waves, and severe droughts. Scientists have 

recently detected accelerated melting of the Greenland and West Antarctic ice 

sheets—much faster melting than anyone had expected. If either of these ice sheets 

melt away, sea levels will rise more than 20 feet, with utterly disastrous implications for Louisiana, Florida, and other low-lying regions of the country and around 

the world. 

There is only a short window of time to stop this from happening. Since the start 

of the industrial revolution, carbon dioxide concentrations have risen from about 270 

parts per million (ppm) to more than 380 ppm today, and global average temperatures have risen by more than one degree Fahrenheit over the last century. A growing scientific consensus is forming that we face extreme dangers if global average 

temperatures are allowed to increase by more than 3.5 degrees Fahrenheit. We have 

a reasonable chance of staying within this envelope if atmospheric CO2 concentrations are kept from exceeding 450 ppm and then rapidly reduced. We still can stay 

within this 450 ppm target—but only if we stop U.S. emissions growth within the 

next 5–10 years and cut emissions by at least half over the next 50 years. U.S. action on this scale—together with similar cuts by other developed countries and limited emissions growth from developing countries—would keep the world within that 

450 ppm limit. 

So here is our choice. If we start cutting U.S. emissions soon, and work with other 

developed and developing countries for comparable actions, we can stay on the 450 

ppm path with a realistic, achievable annual rate of emission reductions—one that 

gradually ramps up to about 2.8 percent reduction per year. 

But if we delay a serious start and continue emission growth at or near the business-as-usual trajectory for another 10 years, the job becomes much harder—the annual emission reduction rate required to stay on the 450 ppm path jumps two-fold, 

to 5.7 percent per year. In short, a slow start means a crash finish—the longer emissions growth continues, the steeper and more disruptive the cuts required later. (See 

Figure 1.) 

45 

Voluntary Measures Won’t Work 

The President’s ‘‘voluntary’’ policy is not working. The inadequacy of a voluntary 

program is plain to see for a growing number of business leaders, state and local 

elected officials, and a majority of the U.S. Senate, as well as to nearly all other 

nations. 

In 2002, President Bush recommitted the United States to ‘‘stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous 

anthropogenic interference with the climate system’’—the objective of the climate 

change treaty (the U.N. Framework Convention on Climate Change) adopted and 

ratified by his father. The current President said his goal was to ‘‘slow, stop, and 

reverse’’ U.S. global warming emissions growth. He set a purely voluntary target of 

reducing the emissions intensity of the U.S. economy—the ratio of emissions to 

GDP—by 18 percent between 2002 and 2012. 

But emissions intensity is a deceptive measure, because what counts for global 

warming is total emissions. Even if the President’s target were met (and recent reports indicate that it may not be), total U.S. emissions will still increase by 14 percent between 2002 and 2012—exactly the same rate as they grew in the 1990s. (See 

Figure 2.) 


mont4.eps
46 

The Need for Mandatory Limits 

While the Administration clings doggedly to the voluntary fiction, most political, 

civic, and business leaders in the United States are moving on. A majority of the 

Senate voted last year for a Sense of the Senate resolution endorsing the need for 

‘‘mandatory, market-based limits’’ that will ‘‘slow, stop, and reverse the growth’’ of 

global warming pollution. The resolution affirms that U.S. mandatory action can be 

taken without significant harm to the economy and that such action ‘‘will encourage 

comparable action by other nations that are major trading partners and key contributors to global emissions.’’ 

State and local governments are leading, with mandatory limits on power plant 

emissions in the northeast and in California. California and 10 other states have 

adopted limits on global warming emissions from motor vehicles. Many other states 

have adopted standards to increase the percentage of renewable power generation. 

Stakeholder processes to address global warming are underway or in development 

in a growing number of states in all regions of the country. 

The constituency for real action is growing. Earlier this year, more than 80 evangelical leaders called for mandatory limits on global warming pollution, citing their 

duty to care for God’s creation. 

Just yesterday, appearing before the Senate Energy Committee, some of the largest electric utilities, suppliers of generating equipment, and electricity customers 

called for mandatory limits. Huge companies such as Duke Energy, Exelon, and GE 

said that voluntary programs won’t work and that they need certainty and clear 

market signals in order to make sensible investments in new power plants that will 

last 50 years. Big electricity consumers like Wal-Mart endorsed mandatory limits 

and committed to cut their energy use and emissions through investments in energy 

efficiency and renewable energy. 

They all get it. Voluntary programs and tax incentives are insufficient to get these 

technologies deployed at a sufficient scale and speed to avoid a climate catastrophe. 

The market conditions for these new investments will not be created without a limit 

on CO2 emissions. 

Mandatory Limits Abroad 

Other countries get it too. Not just the Europeans, but developing countries as 

well. In December 2005, more than 180 countries committed to new negotiations on 

mandatory steps to follow and supplement the current Kyoto Protocol after 2012. 

What struck me most was the near consensus—save only our own government—on 

the market logic of mandatory requirements. The European Union, of course, has 


mont5.eps
47 

2 ‘‘Gov’t demands more focus on green energy,’’ China Daily (Jan. 13, 2006). 3 An and Sauer, Comparison of Passenger Vehicle Fuel Economy and GHG Emisson Standards 

Around the World, Prepared for the Pew Center on Global Climate Change, December 2004. 4 Baumert, Herzog, and Pershing, Navigating the Numbers: Greenhouse Gases and International Climate Change Agreements, World Resources Institute 2005, ISBN: 1–56973–599–9. 

taken the tools of emissions trading pioneered in this country and implemented a 

mandatory cap-and-trade program for CO2. China and India now understand the 

market-based framework offers them the potential for new flows of capital to finance 

cleaner energy development—with an obvious pay-off for them in terms of cleaning 

up their awful local pollution problems, in addition to reducing their CO2 emissions. 

We need to recognize that key developing countries are also already taking actions 

to reduce their global warming emissions growth. For example: 

• China’s GHG emission intensity has improved due to macroeconomic reforms 

and energy sector liberalization. China’s Eleventh Five-Year Plan, which goes 

into effect this year, calls for a 20 percent reduction in energy use per unit of 

GDP by 2010. China’s renewables sector is the world’s fastest growing, at more 

than 25 percent annually. China has enacted a new Renewable Energy Law and 

vowed to meet 15 percent of its energy needs with renewable energy by 2020.2

• China has far surpassed the U.S. fuel efficiency standards for vehicles of all 

classes. China’s new fuel efficiency standards require vehicle classes to achieve 

on average 34.4 mpg by 2005 and 36.7 mpg by 2008 (normalized for the CAFE 

test cycle). American fuel efficiency standards are calculated using the average 

fuel use of the entire fleet sold by an automaker. However, in China, as well 

as Japan, the standards require that each model sold meet the criteria. China’s 

Standardization Administration finalized fuel economy standards for light-duty 

vehicles—cars and light trucks, including sport utility vehicles (SUVs)—that are 

up to twenty percent more stringent than U.S. CAFE standards. The standards 

will save 60 million tons of carbon in 2030, displacing 517 million barrels of oil 

in that year—equivalent to removing 35 million cars from the road. China’s 

leaders are serious about enforcing the standards—vehicles that don’t meet the 

standards cannot be certified for sale or operation—and intend to broaden them 

to include heavy duty trucks.3

• Brazil’s GHG emission intensity levels have risen in recent years because of increased gas use, which increases emissions relative to hydropower, on which 

Brazil has traditionally relied. However, in the transportation sector Brazil has 

saved 574 million tons of CO2 since 1975 through its development of ethanol, 

which is roughly 10 percent of Brazil’s CO2 emissions over that period.4

Even though they have already begun to act, other countries (both developed and 

developing) are likely to take U.S. action or inaction heavily into account in deciding 

on their future actions. Our leadership is fundamental. 

Chinese and Indian officials are working with the Europeans and others on serious steps to make the market-based system work—for example, developing limits 

or benchmarks for emissions in key sectors, in order to set the baseline for earning 

emissions credits that can be sold through the marketplace to raise funds for cleaner energy development. The stage is set, over the next several years, to develop a 

win-win deal that helps cut emissions, opens markets for firms in industrial countries while cutting their domestic compliance costs, and draws all key nations into 

a global effort to prevent global warming. 

U.S. on the Sideline, or Worse 

Where does the Asia-Pacific Partnership fit into this? First, in principle, it is not 

a bad idea to work with a smaller set of key countries. That is what Prime Minister 

Tony Blair set out to do last year in forming a group known as the ‘‘G8 plus 5’’— 

the major industrial nations plus China, India, Mexico, Brazil, and South Africa. A 

consensus on a new market-based agreement among over 20 countries—including 

Europe, the U.S., Japan, and those five developing countries—would cover the bulk 

of world emissions and go a long way to solving the global warming problem. 

But the U.S. has refused to play ball in this ballpark. Instead, the Bush Administration has sought to manufacture another ballpark—cutting out the Europeans— 

and run the game on its own rules. 

The results of the AP6 process so far are truly meager. Limited by the U.S. ‘‘voluntary only’’ approach, the meeting in Australia was nothing more than a gabfest 

about process and no product. The participants released a grab bag of announcements about sharing technology experiences and agreeing to meet again. The U.S. 

put a measly $50 million on the table—not even enough to build one clean electricity plant. 

48 

China, India—and the U.S.—are planning to build hundreds of new power plants 

powered by coal. If nothing is done, these plants will emit huge amounts of CO2 for 

50 years and foreclose any chance to stave off a climate catastrophe. But if we act 

at home and work with them abroad, we can change this future, by investing in 

a new generation of coal plants that dispose of their CO2 underground, not in the 

atmosphere, as well as by increasing investments in energy efficiency and renewable 

power. This will not happen under the voluntary AP6 as presently structured. We 

need more than that. 

This is not to say that the solution lies in more government funding. It does not. 

The solution lies in embracing the market. But as the companies testified yesterday 

to the Energy Committee, without mandatory limits on emissions, there is no market. 

Without mandatory limits, the AP6 is just theater—theater that does not meet 

the interests of China, India, and other countries in constructing a real system that 

fuels cleaner development and cuts emissions. And it is theater that does not protect 

the American people from stronger hurricanes, heat-waves, drought, and coastal inundation that is coming from global warming. 

If we are to prevent catastrophic global warming, we have to take mandatory action—both at home and internationally. No serious environmental challenge was 

ever solved by voluntary action alone. American business gets it. American leaders 

at the state and local level get it. Our partners and competitors abroad get it. It’s 

time for our national leaders to get it, and to act. 

Senator VITTER. Thank you, Mr. Doniger. 

And, Senator Lautenberg, why don’t we start with your questions? 

Senator LAUTENBERG. Thanks very much, Mr. Chairman. 

I am glad to have a chance to see our—talk to our witnesses 

here. I didn’t realize that Mr. Connaughton was going to be released so quickly, but—— 

Senator VITTER. Yes, and I apologize. He had a conflict at 4 

o’clock. And so, I was a little uncertain about your plans, so I released him. And he agreed to come back to you personally, answer 

any submitted questions, or do anything we would like in the near 

future. 

Senator LAUTENBERG. All right. We’ll take advantage of his offer. 

Mr. Doniger, all of you, I’m glad to see you. I may not agree with 

you, but, nevertheless, the process of trying to learn what it is that 

I see that I shouldn’t believe, I’m trying to figure that out, but— 

and when I look at the evidence, as I see it—and some of these 

places are directly familiar to me, having been there—Antarctica, 

for instance. I’ve been down to the South Pole. I wanted to see 

what our scientists at the National Science Foundation were doing. 

And this was about 5 years ago. And it was obvious then that signs 

of problems were starting to manifest themselves. The reduction in 

some of the penguin populations and the melting of significant ice 

caps there. And I was reminded, in my conversations with them 

there, that some 70 percent of the world’s fresh water lies stored 

in the ice there, and the—we’ve seen places—they’ve tried to figure 

out which State the size of which the ice floe represents, but 

they’ve been coming off in States, and I fear that they’re going to 

get to bigger and bigger States, not little ones like Rhode Island 

or New Jersey or what have you. 

So, Mr. Doniger, how should we address the challenges? We 

heard that volunteerism is a noble enterprise and that we’ve got 

time. I don’t understand that, that ability to focus totally on the 

future and say that, ‘‘Well, we’re working on these things that will, 

in a number of years, bring them into the levels that we want.’’ 

But, meanwhile—that’s assuming that we—many of us won’t be 

49 

here to see whether the test has passed, but our children and our 

grandchildren will be. How do we address the challenges posed by 

increased emissions from India and China, after Kyoto? Is the partnership a reasonable way to do it? What would you think? 

Mr. DONIGER. Well, I believe what we need is a regime with 

mandatory limits that creates a marketplace in which private-sector capital, not just token governmental funds, have reasons to flow 

to—into the projects and the programs that are going to reduce 

emissions. We heard, earlier, that there are hundreds of coal-fired 

power plants to be built in China and India—and, I might add, 

planned in the books in the United States, as well, more than 100. 

If these power plants are built in the conventional manner, without 

CO2 capture, then we’re sunk—and I use that verb advisedly—because the only way to stave off the melting of Greenland, the melting of the ice caps, and many of these other impacts, is to curb 

global emissions on a pattern like this, in my chart, and to do it 

by the middle of the next century. Otherwise, we’re sunk. And the 

only way to get the kind of capital moving that would make the difference to cause the Chinese, the Indians, and, for that matter, the 

Americans, to build coal gasification plants with carbon storage— 

carbon disposal underground, built into them, instead of conventional plants, is if there’s a price signal. And the price signal can 

come from putting in a cap and—a declining cap, over time. 

If we—many people, including my colleagues to—on this panel, 

will say, ‘‘Well, this is very expensive.’’ I would say, ‘‘It gets more 

expensive, the longer we put it off.’’ And the analogy is that if you 

are trying to stop at a stop sign, you cannot wait til the very last 

minute to jam on the brakes. Your forehead will hit the window, 

and you’ll end up in the middle of the intersection. And that’s the 

path we’re on now. If we start putting on the brakes more gently 

now, we can avoid the crash that awaits us. 

Senator LAUTENBERG. The—did you have a chance to see—it was 

on 60 Minutes the other night—and that was the report that was 

produced by climate scientist James Hansen. And he did that—that 

was based on conversations with NOAA scientists. And the redaction that was done—I don’t know whether you saw that—it was on 

television, very clear, and I’m sure it’s available, general distribution. Did you look at it closely enough to see that there were things 

there that startled you, in terms of—— 

Mr. DONIGER. Well, I’m a former government official, and I know 

that there is a review procedure for government reports. But I have 

never seen anything quite like what Mr. Cooney did, which is to 

change the meaning of reports to inject uncertainty where 

science—scientists had made quite definitive statements—to try to 

fuzz it up. And that isn’t the way we did things, and it isn’t the 

way things should be done. 

Senator LAUTENBERG. There was a 10-year timeline that was 

mentioned there that said if we don’t get moving on this before 10 

years hence, in a serious way, that there was imminent danger. 

And I saw that—the word crossed out. It said ‘‘could be’’ imminent 

danger. Well, it’s quite a difference. 

Mr. DONIGER. Well, and the conclusion that was represented in 

the draft, and that was edited out, was reached without the benefit 

of the most recent science, which tells us that some of this melting, 

50 

of Greenland, for example, is happening at an accelerated rate, 

much faster than was expected. And—but, still, Hansen and others 

are saying if we start to act quickly, and we get the—follow the 

President’s own goal, to slow, stop, and reverse emissions—if we go 

beyond the slow part to the stop part and the reverse part, and we 

do it soon enough, we can avert this catastrophe. We can keep our 

cities above water. 

Senator LAUTENBERG. Thanks very much. I don’t want to—— 

Mr. Chairman? 

Senator VITTER. OK. Dr. Thorning, you made an interesting 

point in some of your written testimony about industry leaving 

Kyoto Protocol countries for non-Kyoto Protocol countries. Can you 

expand on this point and how we combat that phenomena, in terms 

of a global marketplace? 

Dr. THORNING. I think indications from Europe are that some energy-intensive industries that are unable to stay competitive with 

the price of carbon, as it is, in Europe—and I think it recently hit 

about $120-a-metric-ton of carbon for the right to emit a ton of carbon—are having to relocate. A major aluminum company was 

forced to shut down some plants in Germany. In the U.K., manufacturers are increasingly concerned about the increase in electricity prices. It went up about 34 percent in the U.K. last year, 

and a portion of that is due to the emission trading system. In the 

studies that the—our sister affiliate, the American Council for Capital Formation, has released in years past, we have seen, if the 

U.S. were to try to force emissions down under a mandatory system, there would be leakage of our industry-intensive sector of approximately 15 percent. This was studied by Rich Richels and the 

late Professor Alan Manne, as well as Tom Rutherford, at the University of Colorado. And those are all on the ACCF website, documenting the leakage that we would experience. 

So, I think my suspicion is that, over time, as there is some 

growth in Europe and as the targets get tighter and tighter and 

harder to meet, they will be looking at approaches based more on 

a voluntary approach, based more on a transfer of technology to the 

developing countries. I think the fact that Prime Minister Tony 

Blair, last week, made a speech, I think, in New Zealand, saying 

that U.K. was one of the very few countries that would probably 

meet its Kyoto target. It was a significant statement. He realizes 

most of the other EU countries are way above their Kyoto targets, 

and have no hope of meeting the targets under their mandatory 

system, because to impose taxes high enough to actually meet their 

Kyoto targets would be political suicide. 

So, it seems to me the approach that the current Administration 

is following is the only practical one. If we want to do practical 

things to reduce greenhouse gases, we have to do it in a way that 

doesn’t inflict so much economic pain that it’s unsustainable. 

Senator VITTER. Mr. Doniger? 

Mr. DONIGER. May I just quickly respond? Dr. Thorning and I 

have completely different information coming out of Europe. And 

the European emissions trading system is working. The European 

countries are implementing that, even before their Kyoto period. 

So, it’s no surprise that they’re above the targets now. They’re on 

track to develop more policies, and implement them, to meet those 

51 

targets. And these predictions of failure all overlook an important 

mechanism included in the Kyoto Treaty, which is the international emissions trading that will allow any country which is 

above its target to purchase credits that come from other countries. 

So, the Europeans are on time and under budget. They’re going 

to be complying with Kyoto. And it’s possible that the European 

countries will think carefully about how far they go, in isolation. 

They want to see the United States shoulder its own responsibilities and participate in the system. The Chinese are ready to do 

some things, but not before the United States, the world’s biggest 

polluter, takes on a share of its responsibilities. 

Senator VITTER. In general, Mr. Doniger, how would you address 

the general concern that if you have a cap system, a cap-and-trade 

system, even in the industrialized West, you’re going to create 

movement of industry to non-capped parts of the world? 

Mr. DONIGER. I think that if we were to adopt a cap in this country, that is the fastest way to get important sectors of industry in 

other countries to also take on limits, caps or performance standards. In other words—I guess what I’m saying is, I wouldn’t expect 

the United States to take on a 50-year regime in isolation from 

other countries, but if the United States takes a step forward, the 

Europeans are already acting, the Japanese are already acting, and 

the Chinese and the Indians are signaling that they would be 

ready to do things, too. Taking into account that they start from 

a much lower level of economic development per capita emissions, 

they would be different things, but they would be ready to act. We 

are the key. 

Senator VITTER. OK, I think those are all the questions I have. 

Senator you have any wrap-up? 

Senator LAUTENBERG. No, just, for a moment, Mr. Chairman. I’m 

looking at Kilimanjaro’s snow glaciers. They’re melting, likely to 

disappear completely, it’s said, by 2020. The ice on the summit, 

that was formed more than 11,000 years ago, has dwindled by 82 

percent over the past century. 

Mr. Doniger—[off mic]—of our Navy about activities that they 

might have to focus on the last half of this current century. And 

that would be to fight off refugees seeking higher land coming from 

countries that are inundated by floods. And the predictions made 

by the report—this was quick work by my staffperson here—the 

predictions made by the report include, ‘‘Future wars will be fought 

over the issue of survival, rather than religion, ideology, or national 

honor. By 2007, violent storms smash coastal barriers and render 

large sections of the Netherlands uninhabitable.’’ They talk about 

so many places here. 

And I’d like to submit this for the record, Mr. Chairman. 

Senator VITTER. Without objection. 

[The information referred to follows:] 

Guardian Unlimited—The Observer, February 22, 2004 

CLIMATE CHANGE—KEY FINDINGS OF THE PENTAGON REPORT

Future wars will be fought over the issue of survival rather than religion, ideology 

or national honor. 

By 2007 violent storms smash coastal barriers rendering large parts of the Netherlands inhabitable. Cities like The Hague are abandoned. In California the delta 

52 

island levees in the Sacramento river area are breached, disrupting the aqueduct 

system transporting water from north to south. 

Between 2010 and 2020 Europe is hardest hit by climatic change with an average 

annual temperature drop of 6F. Climate in Britain becomes colder and drier as 

weather patterns begin to resemble Siberia. 

Deaths from war and famine run into the millions until the planet’s population 

is reduced by such an extent the Earth can cope. 

Riots and internal conflict tear apart India, South Africa and Indonesia. 

Access to water becomes a major battleground. The Nile, Danube and Amazon are 

all mentioned as being high risk. 

A ‘‘significant drop’’ in the planet’s ability to sustain its present population will 

become apparent over the next 20 years. 

Rich areas like the U.S. and Europe would become ‘‘virtual fortresses’’ to prevent 

millions of migrants from entering after being forced from land drowned by sea-level 

rise or no longer able to grow crops. Waves of boatpeople pose significant problems. 

Nuclear arms proliferation is inevitable. Japan, South Korea, and Germany develop nuclear-weapons capabilities, as do Iran, Egypt and North Korea. Israel, 

China, India and Pakistan also are poised to use the bomb. 

By 2010 the U.S. and Europe will experience a third more days with peak temperatures above 90°F. Climate becomes an ‘‘economic nuisance’’ as storms, droughts 

and hot spells create havoc for farmers. 

More than 400m people in subtropical regions at grave risk. 

Europe will face huge internal struggles as it copes with massive numbers of migrants washing up on its shores. Immigrants from Scandinavia seek warmer climes 

to the south. Southern Europe is beleaguered by refugees from hard-hit countries 

in Africa. 

Mega-droughts affect the world’s major breadbaskets, including America’s Midwest, where strong winds bring soil loss. 

China’s huge population and food demand make it particularly vulnerable. Bangladesh becomes nearly uninhabitable because of a rising sea level, which contaminates the inland water supplies. 

Senator LAUTENBERG. And to ask whether this tipping point—Dr. 

Montgomery or Dr. Thorning, do you see any need to hasten our 

pace here and try to get things really underway before it’s too late, 

which has been described by Mr. Doniger and others as a 10-year 

cycle? 

Dr. MONTGOMERY. Senator Lautenberg, I think the issue is not 

on the side of the climate science, but the issue is what it is possible to do, in what time frame. Even if we accept Mr. Doniger’s 

proposal that, in the long-run, we must stabilize greenhouse gas 

emissions at a—greenhouse gas concentration at 450 parts per million, he’s already drawn two ways that we can get to that 450-partper-million concentration goal. The choice is what cost we are willing—we incur in choosing to do something early to reduce emissions, versus making a choice about developing technologies. I 

think the fact is that technologies that can provide sufficient energy at an affordable cost with zero carbon emissions, which is 

what, ultimately, it takes to achieve stabilization of concentrations, 

simply do not exist today. 

The difference between the red and the green line that Mr. 

Doniger drew there, between now and 2030, is immensely costly because of the lack of those technologies that can provide energy with 

very low carbon emissions at an affordable cost today. 

If we devote our resources—instead of trying to find small reductions in emissions at high cost today, if we devote those resources, 

developing the breakthrough technologies that can provide the energy that we need with zero carbon emissions at some point in the 

future, that other gap between the green line and the red line beyond 2030 can be quite affordable. It’s a matter of cost and a matVerDate Nov 24 2008 13:18 Jan 14, 2011 Jkt 63518 PO 00000 Frm 000056 Fmt 06633 Sfmt 06601 S:\GPO\DOCS\63518.TXT SCOM1 PsN: JACKIE
53 

ter of whether we put the resources today into developing the technologies that we don’t have, that are required in order to stabilize 

greenhouse gas emissions—greenhouse gas concentrations, or 

whether we put those resources into much more expensive and 

much smaller reductions that are possible today. 

I think that’s the choice. It’s not a question of whether a 450- or 

a 550- or a 750-part-per-million is what we should choose. Whichever of those we choose requires to—implies stabilization of concentrations. We don’t have the technologies today that it takes to 

do that, we do have those technologies to make them affordable, 

then those—then there is nothing wrong with that crash reduction 

later. That’s exactly what we want to do, which is develop the technology first. 

Analogies to putting on the brakes are completely beside the 

point. We actually have tools for looking at the economics of this, 

and thinking about when technologies can become available that 

let us address the question directly. And they all support the notion that the technology development is absolutely critical, and 

dwarfs the emission reductions that would be affordable today. 

Senator LAUTENBERG. Dr. Thorning, do you have any comment 

to make on this? 

Dr. THORNING. I’d just like to add that—kind of backing up what 

Dr. Montgomery said, there was a Department of Energy study released by the Energy Information Administration about 4 or 5 

years ago, that looked at that question of early start versus late 

start, and they concluded that the cost of meeting a Kyoto target, 

as well as others, would be reduced if we spent the time, early on, 

trying to develop the technologies, rather than beginning to reduce 

emissions immediately. 

Senator LAUTENBERG. Your response, Mr. Doniger? 

Mr. DONIGER. Well, the truth is that the Federal R&D budget for 

these sorts of things is, if anything, shrinking. And it was never 

big enough, and can’t imagine it being big enough, to mount an effort on this scale. You have to make it a private-sector effort. And 

the private sector is saying, ‘‘We’re ready to go start building gasification plants. We’re ready to start doing carbon storage in old oil 

fields to pump more oil out.’’ But right now there is a cost gap, because there’s no price of dealing with carbon. If you give us a capand-trade program, a mandatory limit, it will signal that that cost 

gap is either gone or going to go away, and it makes sense to make 

those investments. 

There’s already one such plant being built by BP and, I think, 

Southern California Edison, in Long Beach. They’ve committed to 

build this. They’re going to have that plant up and running and 

storing carbon underground before the Federal FutureGen Program—before the first Federal FutureGen plant. 

So, if the private sector were properly motivated, we could get 

this done a lot faster than with this R&D program, this sort of 

Harry Potter R&D program for which there’s no funding. 

Senator LAUTENBERG. Yes. Well, the question is, How does one 

determine cost? Is cost expressed strictly in dollar increments, or 

is cost expressed in the—perhaps destroying a way of life as we 

currently know it? I assume all of you are aware of the fact that 

an unmentionable, a—it’s more than four letters, but—the word 

54 

was not able to be used, and that was ‘‘nuclear.’’ And now there 

are several applications for nuclear plants pending in front of the 

NRC. And it would have been unheard of. And, frankly, I think it’s 

a rather—it’s a move, I think, induced by desperation, because 

we’re locked into the fossil-fuel disappearance, eventually, in any 

event. So, I think things are changing, and the measurement of 

cost is a significant factor, in my view. I look at it from my grandchild’s—my grandchildren’s eyes. 

Thank you very much. 

Thanks, Mr. Chairman. 

Senator VITTER. Thank you very much. 

With that, we’ll have some follow-up questions we’ll submit to 

you and get your answers for the record. 

Thank you very much for being here and for your participation. 

The hearing is adjourned. 

[Whereupon, at 4:35 p.m., the hearing was adjourned.] 

(55) 

* Response to written questions was not available at the time this hearing went to press. 

A P P E N D I X 

PREPARED STATEMENT OF HON. DANIEL K. INOUYE, U.S. SENATOR FROM HAWAII

It is important that we examine the current and future role of science in the AsiaPacific Partnership. Thus far, I am not satisfied that this initiative will respond to 

the concerns of our scientists, our citizens, or Congress. 

While it is essential that we work closely and respectfully with our Asian Pacific 

partners, I am surprised at the complete lack of connection between the proposed 

Federal expenditures and any measurable goals or achievements that will help us 

address the very real threats of climate change in the Pacific. 

The people who live in these areas, including Hawaii, the U.S. territories, and 

other Pacific island nations, are facing these threats already, and the projections indicate further increases in sea level rise and ocean warming, spelling disaster for 

our island economies. 

I urge the Administration to take a hard look at this proposal and meet with my 

constituents to hear their concerns and better understand these threats. Only then 

can Congress provide any support for this initiative. 

WRITTEN QUESTIONS SUBMITTED BY HON. DANIEL K. INOUYE TO

HON. JAMES L. CONNAUGHTON * 

Question 1. Has the Administration consulted with the Hawaii and the Pacific islands representatives on the urgency of concerns about impacts of climate change 

in the Pacific, and discussed establishing goals and targets for meaningful action? 

Please be explicit as to who you have met with and what they have asked for. 

Question 2. Why is the United States, but not Japan, or the other Asian nations, 

putting money forward for this? How much can we expect from these partners over 

the next few years? 

Question 3. Since none of the Pacific island nations. or anyone in Hawaii that we 

have spoken to, appear to be involved, how much money and time would it take to 

confer with scientific and climate change experts in my state, as well as Pacific island stakeholders, to establish scientifically-based standards that will help explain 

to Congress what we can expect from this investment? 

WRITTEN QUESTIONS SUBMITTED BY HON. FRANK R. LAUTENBERG TO

HON. JAMES L. CONNAUGHTON * 

Question 1. Why did prominent government scientists recently tell the news 

media that their access to the press was being controlled and that their documents 

were being edited to suit the Administration’s political purposes? If there was no 

problem, why did NASA rewrite their policies on this issue? 

Question 2. Is the Administration going to allow California to set its own limits 

on greenhouse gas emissions from vehicles? 

Question 3. Is there any circumstance under which this Administration would reconsider its opposition to any mandatory controls on greenhouse gases? 

Æ